Labour market deterioriation is now becoming a cause for real concern

Today’s labour market statistics (which mainly cover the period between September to November 2010) are simply bad news. On the quarter, unemployment rose by 49,000, employment fell by 69,000 (the fastest fall since August 2009) and economic inactivity rose by a significant 89,000.

The monthly unemployment data are slightly more promising (a small fall of 4,000 – although this is within the statistical margin of error) but monthly employment levels fell by 36,000 (meaning that over the last two months levels have fallen by 100,000 in total) and inactivity rose by 83,000. Claimant unemployment fell slightly, but at 1,456,600 levels remain high and there is no sign of a sustained or significant reduction in new claims. The claimant unemployment rate remains unchanged at 4.5 per cent.

Although it is hard to find positive signs in these figures, the Department for Work and Pensions have tried, with Minister of State Chris Grayling stating:

“Encouragingly there has been a rise in the number of vacancies.”

Vacancies rose – but as Richard Exell has shown, the Office for National Statistics have made a specific point of mentioning this is a result of the temporary jobs adminstering Census 2011. Excluding census vacancies the total number of available jobs saw a further fall of 6,000 on the quarter leaving the total vacancy figure at 456,000,  similar to the vacancy levels we saw at the end of 2009.  In addition, even when the temporary census work is included, the ratio of jobs to unemployed people is getting worse – there are now 5.3 unemployed people for every vacant post.

Young people are being particularly badly affected. The unemployment rate for 18-24 year olds is now 18.1 per cent, only 0.1 per cent less than its peak during the recession (18.2 per cent in September 2009). In addition, the number of young people facing unemployment of 6-12 months is rising (14,000 on the quarter and 3,000 on the month); the number of unemployed 16-17 year olds is now the same as its recessionary peak (206,000); and the unemployment rate for this group is the highest on record (since April 1992).

It is therefore particularly concerning that new Future Jobs Fund jobs no longer exist, that Education Maintenance Allowance – key to encouraging and enabling young people to stay on at college rather facing unemployment – is being cut and that the coaltion is in the process of ending a number of key labour market programmes as it starts the six month plus transition to the Work Programme.

As current provision ends many unemployed people will experience significantly less support for at least the next six months – just at the point at which is seems the labour market may be taking a turn for the worse.

Today’s figures also contain signs of possible new regional variations in unemployment, with the North East and the East Midlands both seeing large rises of 0.6 percentage points over the calander quarter, taking their unemployment rates to 9.6 per cent and 8.1  per cent respectively. In the West Midlands (where unemployment has been rising for three consective months), there was a 1.6 percentage point rise over the quarter, leaving the region with the highest unemployment rate in the country – 9.9 per cent. Northern Ireland has also seen a large unemployment rise of 0.9 points, taking the rate to 7.8 per cent.

Underemployment remains a feature of the UK labour market. Fifteen per cent of part-time workers now say that they can’t find full-time work (another record rate) and while there was a small monthly fall in the proportion of temporary workers seeking permanant jobs the proportion of temporary workers in this group (37.5 per cent) remains extremely high.

Part-time self-employment and temporary employment are also the only employment measures showing quarterly increases, suggesting that where work is being created it is likely to be relatively casual and low paid.

Overall, there is far more bad news here than good. With the Office for Budget Responsibility (OBR) forecasting International Labour Organisation (ILO) unemployment of 2.6 million for the first half of 2011, and the average of  economic forecasts (published by the Treasury today) suggesting that most economists believe claimant unemployment is also likely to rise, the government needs to be honest about the scale of the labour market challenge that it faces.

Instead of cutting labour market programmes the coalition should be investing in tackling unemployment (in particular attempting to mitigate the risks of long-term unemployment faced by young people) and instead of sweeping public sector cuts there should be a focus on a real strategy for growth.

Unemployment is a both a personal tragedy and a significant economic concern -tackling it needs to be at the very top of the government’s agenda.