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Unemployment reaches 2.5 million

The latest unemployment figures take a bit of unravelling. The headline figure for the three months to February, using the Labour Force Survey measure, was up by 43,000 over the quarter to reach 2.5m. This is the highest figure since 1994. This gave an unemployment rate of 8.0% which was up 0.1% on the previous quarter. This is bad news.

However, the number of people claiming Jobseeker’s Allowance, which is also known as the claimant count, actually fell by 32,900 between February and March 2010 to reach 1.54m. This is a bigger fall than anticipated and this measure of unemployment has now fallen for four out of the last five months. This is good news.

Are things getting better or worse in the UK labour market?

So, how then do we reconcile two figures which are moving in opposite directions. It seems that one major factor to the fall in those claiming Jobseeker’s Allowance is that a number of new training schemes have been put in place which are particularly aimed at young people, and which are at least temporarily, keeping them off benefits. Thus, they cannot be unemployed whilst they are being trained. In fact, official figures show that the number of people on government training and employment schemes has increased by 12,000 or 11.2% in the three months to February.

The question is, when the training is over will there be any jobs available? I have already blogged this week about the possibility of a jobless recovery and given the upcoming cull in the public sector it would appear that unemployment will rise further over the next year or so.

An additional factor which would back this up is the fact that there are now 1.05 million people working part-time – because they could not find a full-time job. This number increased by 13,000 over the past quarter. We therefore have a major problem of underemployment.

The significance of this is that these people are now classified as ‘employed’, and it may be as the economy picks up that they will get the first opportunity to move into full-time jobs as the companies they work for start to expand. But as they work more hours they will still just be amongst the already ‘employed’. The point being that the labour market could expand fairly quickly without reducing the unemployment figures.


So, the future changes in the labour market are going to be difficult to call. One positive note is that the number of vacancies for the three months to March 2010 was up 9,000 over the quarter to reach 475,000.

Finally, average earnings figures were also published yesterday. These show that the annual growth rate for regular pay, excluding bonuses, was 1.7% for the three months to February 2010, up from 1.5% in the three months to January. But, what continues to astound, is the difference between the private and public sectors.

When bonus payments are excluded, which mainly apply to the financial sector, growth in private sector average earnings stood at 0.9% compared to a whopping 3.9% for the public sector. Mr Brown is obviously being very generous to government servants, but the day of reckoning cannot be far off.

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Posted in Earnings, Employment, labour markets, unemployment

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