Labour market in holding pattern

Unemployment has unexpectedly fallen. The labour market effectively remains in a holding pattern with encouraging headline numbers, but worry underlying trends.

Today’s labour market statistics show an unexpected fall in unemployment. The labour market effectively remains in a holding pattern with encouraging headline numbers, but worry underlying trends. Much will depend on the strength of recovery and what happens in the public sector.

ILO unemployment is down 33,000 on the quarter to January 2010 with the number of people claiming Jobseekers’ Allowance (the claimant count) down 32,300 in February. This is the largest monthly fall in the count since November 1997 and particularly positive given that the period after Christmas is normally a tough month for jobs. Unemployment now stands at 2.45 million or 7.8 per cent.

Youth unemployment is also down – by 34,000 on the quarter and on the JSA count too. Meanwhile, vacancies are up by 39,000. All this is evidence of things moving in a good direction – or at least not getting worse.

Commentators will focus on the 149,000 rise in the number of people who are inactive, but 98,000 of these are actually extra students. Along with the continued reduction in working hours, this explains why the headline figures are encouraging. In essence, people are reducing hours or are doing other things while the job market is tough. Less encouraging is the fall in employment, which is down 54,000 on the quarter, and the 61,000 rise in long term unemployment – now at the highest level since August 1997.

Looking ahead, the prospect of public sector jobs cuts looms on the horizon. In the quarter to December 2009 there was a 7,000 rise in public sector employment, alongside a 61,000 decline in private sector employment.

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