Is a rise in self-employment disguising unemployment?

For the last few months, the headline numbers have been good, but a detailed look at the figures gives plenty of cause for concern.

E-mail-sign-up Donate


We now seem to be in a familiar pattern when it comes to labour market statistics – for the past few months the headline numbers have been good, but a detailed look at the figures gives plenty of cause for concern.

Today’s numbers show a fall in unemployment and rise in the number of people in work.  That is certainly good news, especially as much of the rise in employment was in full-time work. Some analysts have pointed out that that temporary hiring ahead of the Olympics may have boosted the numbers.

London was responsible for around half of the total growth in employment suggesting that may well be something in this and it will be several months before we can tell if this a temporary upward blip or if it represents more suitable growth in employment.

Many have been left scratching their head as the economy contracts but employment grows. Several factors point to underlying weakness in the labour market though that can help explain this conundrum. First this month saw yet another rise in under-employment to a new record.

Second there are concerns that much of the recent rise in self-employment may not represent genuine entrepreneurial zeal but rather disguised under- and un-employment.

Third the labour market performance is typically a lagging indicator, it reflects not what s happening in the economy today but what was happening 12-18 months before. Unless the economy turns around soon it may be only a matter of time before unemployment starts to rise again.

Today’s numbers also paint a bleak picture for the young. Whilst the small fall in youth unemployment is welcome, we still have over a million young people out of work. 480,000 young people have now been out of work for over 6 months and 265,000 of those have been out of work for over a year.

As TUC research published today shows the outlook for the ‘Class of 2012’ is the worst in almost twenty years.
To truly gauge the strength of the ‘recovery’ in the jobs market, the best place to look is earnings.
As the chart below demonstrates, the picture here remains grim.

Despite a welcome fall in inflation since the autumn real wages continue to fall – even those in work are getting poorer by the month.
If we had a healthy labour market then one would expect wages to be rising and real earnings to begin to grow. There is little evidence that is happening.
Until we see sustained real wage growth and the squeeze on incomes starts to ease it’ll be hard to talk about ‘recovery’ in any meaningful sense.


See also:

Unemployment: Headline figures camouflage underlying picture of weakness 16 May 2012

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

We need a firm limit on the time we are prepared to tolerate anyone being unemployed 17 Apr 2012



Sign-up to our weekly email • Donate to Left Foot Forward

Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.