The bad news in yesterday’s employment stats (and it’s not about migration)

The claim that migrants are disproportionately accessing jobs in Britain compared to workers of UK nationality is based on a simple misreading of the statistics.

Yesterday’s monthly labour market statistics (pdf) from the Office for National Statistics (ONS) were bad news; not disastrous, but bad enough to spark serious concerns about the direction of the UK labour market.

They were particularly disappointing because the previous month’s figures (pdf) had shown what looked like a promising fall in unemployment: the working age unemployment rate had fallen to 7.8%, the first time it had moved outside the range 7.9-8.1% since the spring of 2009.

In contrast the figures for March-May showed the working age unemployment rate rising back to 7.9%.

The very slight numerical fall in unemployment which dominated yesterday’s headlines can be discounted; what is important is the return of the unemployment rate to its earlier value, which means unemployment in the UK has essentially been oscillating around 8% for the last two years.

To avoid confusion, this is the unemployment rate for those aged 16-64: ONS also reports the unemployment rate for all economically active people over 16, which is slightly lower, and to add to the confusion, Eurostat uses a different base again- see below.

To see why this stability of the unemployment rate is worrying, Graph 1 below shows unemployment from 1971 up to yesterday’s figures. We have to go back to the mid 1980s to find a period when unemployment rose and then stabilised at its higher rate for a comparable length of time.

As of the present moment, unemployment in the UK looks frozen: we have yet to see any sign of a downward trajectory.

Graph 1:

ILO-unemployment-age-16-64-from-1971-2011
This should be a source of concern, not grounds for apocalyptic prophecies. Every recession is different and it remains the case that unemployment rose much less during this recession than was widely expected given the collapse in output.

This month’s downturn may just turn out to be a blip in the downward trend we have been waiting for. But the absence of any real signs of labour market recovery in the UK contrasts with the picture in a number of comparable economies.

The figures in Graph 2 below from Eurostat, which run from June 2010 to April this year, show that the stability of UK unemployment is not a general pheneomenon across wealthy economies. (Note that the population base is different for these figures).

Graph 2:

Change-in-unemployment-age-16-64-June-2010-April-2011
There were other worrying signals in yesterday’s figures. It is striking that while male unemployment is far lower now than in the early 1990s, at 6.3% compared to a peak of 10.7% in late 1993, female unemployment at 6.1% is only one percentage point lower than it was then.

The long term unemployment rate (24 months or more) has more than doubled since the summer of 2008 and has shown a particularly sharp upward trajectory over the last year. Flows on to Jobseeker’s Allowance have substantially exceeded off-flows since March, in contrast with most months last year.

With all of these negatives to focus on in yesterday’s figures, what did the Daily Mail choose to highlight?

‘Iain Duncan Smith was RIGHT: Foreign workers took three in four new jobs in Britain in the last year’

– Number of foreign men and women in work soars by 334,000 to over 4 million

– British-born workers finding employment in same period rose by only 77,000

Now anyone reading this might be under the impression that only 77,000 ‘British-born’ workers got a job last year, compared to 334,000 ‘foreign workers’. So it’s worth pointing out that even with unemployment remaining stable, some four million people left the claimant count last year, most of them for jobs, and they represent only a fraction of people moving from unemployment into work.

Sir Andrew Green, chairman of MigrationWatch UK, said:

“It is impossible to look at these figures which show a substantially greater increase in the foreign-born workforce than in the British-born workforce without deducing that there has been a significant impact on the prospects for British workers.

“There is no point in being in denial about this.”

In fact, it is perfectly possible to look at the figures without leaping to any such deduction, and without being ‘in denial’. Table 1 below shows why.

It doesn’t cover the same period as yesterday’s figures because ONS haven’t published the relevant data yet, but it illustrates the importance of a factor which rarely gets mentioned in these contexts, which is economic activity – basically, whether people are in the labour market or not.

Between 2009 and 2010 there was virtually no change in aggregate working age employment – along with a huge amount of turnover within this stable total, as we have seen – but for UK nationals of working age total employment fell by nearly 50,00 and non-UK nationals’ employment increased by 45,000.

Was this because migrants were crowding UK workers out of jobs? Hardly, because economic activity among UK nationals fell 42,000 over the same period. In fact, the change in the balance of UK national and non-UK national employment pretty much corresponded to the change in the numbers of economically active people in each group.

Table 1:

Economic-activity-and-employment-Jan-Dec-2009-Jan-Dec-2010
The claim that migrants are disproportionately accessing jobs in the UK labour market compared to workers of UK nationality is based on a simple misreading of the statistics.

Nonetheless, the combination of a stagnant labour market and commentators eager to voice their know-nothing insights at every available opportunity means we can expect to hear these claims with numbing regularity for some time to come, every time the monthly labour market statistics are released.

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