Sunday, June 19, 2011

Behind The Unemployment Figures

On the face of it a drop of 88.000, any fall in unemployment and the misery it brings people and families is welcome, but this fall continues to defy the logic, so what is behind it?

First of all the fall in headline unemployment was larger than expected because of the number of  young people entering into higher and further education, this is because students mindful of the Tory government's increase in tuition fees have not taken gap years and gone straight into university in an attempt to beat paying the full fees.

There are still 820.000 more people out of work now than there were before the start if the recession.

Unemployment figures are a lagging indicator, which means they lag behind what is really happening in the jobs market and the economy.

George Osborne's Office Budget Responsibility only expected around 20.000 public sector workers/civil service to lose their jobs,  the Office National Statistics has released figures which show that this figure has already reached 143.000 to the end of March 2011. This is a huge difference and one which the Tories are trying desperately to hide.

Largest Cuts So Far

  • Local Authority Redundancies - Minus 88.000
  • Central Government  Redundancies - Minus 37.000
  • Education Redundancies (Teachers/Teaching assistants etc) Minus 24.000
  • NHS Redundancies Nurses etc (Cameron supposed to be protecting this) Minus 10.000
The particularly worrying thing about this is these redundancies are all recorded up until March 2011.
All the cuts and job losses being announced last year have not started to take effect commencing April 2011, so the 143.000 people who have already lost their jobs were before the major job cuts were announced and there are still tens of thousands more public sector workers set to lose their jobs in the near future.

This is why all analysts say that unemployment is going to rise.

Also there is a certain amount of "Treasury trickery" in these figures which I will try to explain.

  1. Many people who have recently lost their jobs cannot claim unemployment benefits because they have redundancy packages which actually bar them from claiming until their savings dips below a certain amount. They are technically unemployed but do not get counted so do not show on the unemployment register.
  2. Workers aged approximately  60 plus who have lost their jobs and who cannot find another job or have no intention of working again and can't claim anything because of savings and pensions. They are unemployed but do not count  so do not show up on any statistics sheet.
  3. The total number of 16 to 24 year olds in full-time education increased by 61,000 on the quarter to reach 3.08m many of these young people would have shown up in the unemployment register as leaving the register, but they have not found jobs they have commenced full-time further or higher education.
  4. The number of people working part-time also rose by 31,000 to 7.95m and is 178.000 more than it was one year ago while those with second jobs remained high at 1.15m, suggesting hundreds of thousands of people are "underemployed". Many of these people although are not in full-time work would have been taken off of the unemployment register as having found work.
  5. Many (I don't have figures) construction workers simply do not claim unemployment benefit although technically unemployed because of the start and stop nature of their work, there are thousands of builders looking for work in a construction industry that is in recession.
  6. The number of those people taking temporary jobs will also skew the real number of those unemployed the number of people said to be in temporary employment has now risen to 1.595.000, this is a huge increase of just under 100.000 in the past 12 months.
So already you can see that the drop unemployment numbers can, actually, largely be attributed to an increase in the number of people going into full-time study, and the number of people working part-time because they could not find a full-time job and also the number of people through redundancy packages and pensions etc who cannot claim so are not registered as unemployed.

As to the claimant count, the figures rose unexpectedly by 19.600  to reach 1.49m. However, the figures are skewed by a change in the way benefits are calculated. The Government is moving thousands of single mothers off income support onto unemployment benefits, known as Jobseeker's Allowance. The switch is causing the number of people on the dole to rise dramatically.

If you were to take out the distortion, from part-time workers and students as well as the change in benefits in the claimant count, what you are left with is  what can be best described as a "flat" employment market.

Whether the private sector can absorb the job losses from the public sector remains unclear however there are still the tens of thousands of redundancies to come from the public sector and civil service – still to take their toll on the labour market and 200.000 to lose their jobs in local authorities.
The estimate came from the GMB union, which said it had received official notifications of 90,000 planned full-time equivalent job losses from half of England’s 152 councils. Total redundancies were likely to be more than doubled when part-time, agency and contract workers were taken into account. Since this announcement it has been announced that even more workers may lose their jobs than expected in local authorities.

The claimant count has risen dramatically from an expected rise of 7000 to an alarming 19.600 in just one month, this is very bad for the Treasury as it means we have to pay an extra 19.600 benefits,part of this would be to top up the part time workers who cannot find full-time jobs.

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