The numbers behind the headlines - employment, unemployment and what it all means (Carl Malways)

There are a number of misleading statistics currently being bandied around at the moment regarding the state of the jobs market in the United Kingdom.  Some commentators who are trying to be positive point to the massive jobs growth that has occurred since the start of the year, whilst the more bearish tend to point to the fact  that total unemployment has continued to increase in 2010 and that the majority of the new jobs that have been created are either temporary or part-time.

So what is the real story?  Well let’s look at the raw numbers. 

It certainly is true that there have been a large number of jobs created this year.  Total employment has increased by almost 350,000 since the start of the year, and there are now almost 2.8 million people working in the country.

These jobs have been predominantly part-time and temporary.  Of the net new jobs created, 250,000 were part time jobs and 120,000 were temporary jobs.  Full time jobs have actually fallen by 40,000 since the start of the year.  However, is this surprising?  Coming out of a very deep recession it is not surprising that employers are being cautious in their approach to headcounts.  Employing new staff on a part time or temporary basis is likely to be the first steps to taking them on permanently.

Total unemployment has increased in the year, but only marginally at 5,000 jobs.  With a growing labour market, renewed government efforts to take people off long term benefits and continued economic uncertainties this growth in unemployment is relatively small.  Indeed, the total increase in unemployment has been surprisingly low during the downturn.  Total unemployment peaked at around 2.5 million, having increased by around 900,000, much lower than the 3.0 million estimate that was forecast during the downturn.

However, what of the outlook for unemployment?  For one, because unemployment increased less than forecast during the downturn, there are concerns that businesses have been hoarding labour, preferring to cut wages and hours instead.  Wage and hours cuts are certainly evident in the statistics.  With the economy starting to grow again, it is highly possible that businesses will work their current staff harder rather than looking to employ more people.

The impact of the public sector job cuts is a big unknown.  Government estimates suggest that 500,000 jobs will be lost in the public sector over the next five years, but what is the indirect impact on the private sector?  This is very hard to estimate but the cuts will almost certainly lead to many more job losses in private companies.  But this will be spread throughout the next five years.  The private sector will be creating jobs over this period and it seems possible that at least an additional 100,000 jobs per annum can be created as the recovery gains momentum.

The immediate outlook for the labour market is one of potential weakness, as businesses and the public sector react to the deficit reduction plans with headcount freezes and job cuts.  Nevertheless, the fiscal plan has provided companies with the clarity they need to adjust to these changed economic circumstances, whilst continued support from low interest rates and the weakness of the pound will provide a firm footing for businesses to recover and then expand.

In conclusion, the labour market was surprisingly strong during the downturn, has started to create jobs (although not permanent jobs), will be weakened in the short term following the announcement of Government deficit cuts, but will likely to be seeing employment growth and a sustainable fall in unemployment by the second half of next year.

Some tough times to come, but be prepared for that light at the end of the tunnel…it is coming!


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