Unemployment: Headline figures camouflage underlying picture of weakness

A recovery driven by part-time work and accompanied by falling living standards won’t feel like a recovery to most people, writes Duncan Weldon.

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As with last month’s release, today’s labour market statistics present good headline numbers that camouflage an underlying picture of weakness.

Unemployment, on the broad International Labour Organization measure, fell by 45,000 on the quarter to 8.2%. This good news was repeated in the narrower (and timelier) claimant count series, where unemployment fell by 13,700 in April. Employment rose by 105,000 on the quarter and the employment rate increased to 70.5%.

However, the increase in employment, and the corresponding fall in unemployment, was entirely driven by part-time work:

• The number of people in full-time work fell by 13,000 whilst the number working part-time increased by 118,000 – over the past year the number of people in full-time work has fallen by 55,000 whilst the number in part-time work has increased by 150,000;

• The number of people working part-time who say they want but can’t find full-time work rose by 73,000 to a record high of 1,418,000 – the number of people working temporary contracts who want a permanent position rose by 14,000 to 616,000;

• More than two million people are now ‘under-employed’ alongside the 2.6 million out of work;

• In other words whilst the labour market is showing signs of stabilising and whilst unemployment is starting fall, the ‘recovery’ is being driven by part-time and often precarious work; and

• Whilst unemployment is falling, under-employment is rising.


See also:

Headline unemployment fall is good news, but underlying picture remains grim 18 Apr 2012

Latest labour market stats are encouraging, but we should remain cautious 14 Mar 2012

Employment figures mask the rise in under-employment 15 Feb 2012

“The PM is wrong: the labour market is very weak” 18 Jan 2012

Unemployment: Plan A isn’t working 14 Dec 2011


This underlying weakness is feeding through into extremely weak wage growth. Headline unemployment has been falling and employment rising for two months and normally one would expect a tightening labour market to lead to a faster pace of wage growth. In fact the opposite is happening – wage growth has been slowing since July last year.

As Chart 1 makes clear, the large fall in inflation since it peaked in the autumn has not relieved the pressure on real wages.

Chart 1:

Real wage falls slowed towards the end of 2011 but have reaccelerated since January 2012. Continuing falls in real wages will put the recovery at risk.

Whilst the headline figures today are obviously to be welcomed it would be a mistake to hail a successful recovery in the labour market. As long as real wages are falling living standards will remain under pressure. A recovery driven by part-time work and accompanied by falling living standards won’t feel like a recovery to most people.


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