The truth about Britain's employment figures

Sep 12, 2012, 03:16

Merryn Somerset Webb

Posted byMerryn Somerset Webb

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Today’s employment numbers seemed to confuse a good many people.

How, they ask, can employment be going up so fast in a recession? (The number of people in work went up by 236,000 in the three months to July, leaving the number of people employed in the UK a mere 1,000 short of our all-time high.)

And if employment is rising so fast, how come unemployment isn’t coming down faster? (The number of the unemployed fell by a mere 7,000 in the same period. )

The answers are more straightforward than you might think.

First, unemployment. It isn’t going down as fast as it would otherwise for the simple reason that more people are entering the workforce. Andrew Sissons points out that 90,000 new people started looking for work over the quarter. Large numbers of students, retirees (presumably quantitative easing  has played havoc with their retirement incomes) and those on long term sick leave are returning to the workforce, something that prevents the unemployment number falling even as the employment number rises. 

And as for how so many people can find work in a recession, the first thing to note is that we might not be in a recession. The GDP numbers are endlessly revised, and very few of the other statistics out in the last few months back up the idea that the economy is actually contracting at the moment. It clearly isn’t booming (and isn’t going to for some time to come), but it probably isn’t shrinking either.

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The second thing to note is that it is perfectly possibly for more people to be employed and for the total number of hours worked across the economy to be up (14.3 million hours more than in the relevant quarter last year) but output in GDP terms to flatline or fall (see my previous blogs on this subject here). So it isn’t inconsistent for the levels of inactivity to be at their lowest since 1991 but for the economy to be mildly contracting at the same time.

The third, that while we can’t see precisely what the jobs are, they don’t look to be the kind of jobs you see in boom times. 91,000 of them were in London, and while a good many of those are surely long-term jobs, others will have been Olympic related. A large number of the newly employed have also either employed themselves (not something most people do by choice) or gone part time (the number of people forced to work part time when they want a full time job is at a new high).

There might also be something else going on. There is huge underemployment. It is also worth noting that once again real wages are falling and, worryingly, that the number of people who have been unemployed for over a year has risen to 904,000.

The thing to remember when you look at all these numbers is that the deleveraging process that we are having to go through at the moment – by which we give up the bubble growth of the pre 2007 years – doesn’t have to be dramatic.

Daniel Hannan writes here about the “slow, wretched” decline he expects in the eurozone as the peripheral economies deal with their debts. He might be a more miserable than is warranted, but dig into our stats and perhaps something similar is happening here.

Our employment numbers look fine; good, even. But if they reflect not full time jobs in dynamic industries but hordes of desperate pensioners and women taking whatever work they can at falling real wage levels, they don’t necessarily tell us things are improving as we would like them too.

Comments (31)

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  • 1. Kawasakifreak

    (13 September 2012, 11:49AM)  Complain about this comment

    Perhaps falling real wages in the uk is part of the correction process continuing throughout the world economy ?
    Wealth tfr'ing from mature western economies with unsustainable debt & social costs to low debt & more commercially aware countries elsewhere ?

  • 2. Alastair

    (13 September 2012, 09:22PM)  Complain about this comment

    There are many analogies for the UK economy. The Buggy Whip Manufacturer who kept trying to make better Whips to compete with horseless carriages; He improved efficiency & productivity by 100% but sales kept falling off. He couldn't understand why he went out of business. The other is the Airliner crusing at 30,000 ft. It is a dark night and the flight is smooth. Unfortunately, the passengers are not aware that the Pilot in the sealed cabin is dead and the aircraft is on a slow, gentle glide to its doom. There needs to be an Apple-style revolution in thinking or unemployment will continue on its slow glide to disaster. Net tax contributors will be asked to pay even more – directly and indirectly. The government is not tackling the core issues of a long term unemployment/benefit culture excacerbated by foreigners in low paid jobs that fit UK nationals on benefit should be doing. Outrageous tax avoidance schemes by major businesses/individuals is taking too long to be resolved

  • 3. Alastair

    (13 September 2012, 09:22PM)  Complain about this comment

    There are many analogies for the UK economy. The Buggy Whip Manufacturer who kept trying to make better Whips to compete with horseless carriages; He improved efficiency & productivity by 100% but sales kept falling off. He couldn't understand why he went out of business. The other is the Airliner crusing at 30,000 ft. It is a dark night and the flight is smooth. Unfortunately, the passengers are not aware that the Pilot in the sealed cabin is dead and the aircraft is on a slow, gentle glide to its doom. There needs to be an Apple-style revolution in thinking or unemployment will continue on its slow glide to disaster. Net tax contributors will be asked to pay even more – directly and indirectly. The government is not tackling the core issues of a long term unemployment/benefit culture excacerbated by foreigners in low paid jobs that fit UK nationals on benefit should be doing. Outrageous tax avoidance schemes by major businesses/individuals is taking too long to be resolved

  • 4. Alastair

    (13 September 2012, 09:32PM)  Complain about this comment

    Please don't think I am just wanting a tightening up of benefit/tax regulations etc. I want the UK to be a place of creativity and production which employs its citizens in fruitful and productive jobs that ultimately improve our balance of payments again. We are simply importing too much non-essential goods . Increasing the basic tax allowance to £12.5k a year and forcing fit people into jobs (and to save 10% of that into a pension) would be a good start. The unemployment/benefit figues will tumble in due course.

  • 5. Mark

    (14 September 2012, 01:01AM)  Complain about this comment

    Alastair,
    "forcing fit people into jobs" - the problem with the economy is that despite a lack of demand we insist that ever increasing production must be the basis for our society - castigating people for failing to produce things that no-one wants or for not making a sufficient effort at pretending to be doing something.
    Instead of more call centre workers or salespeople, let's pay people to go to the pub, read books and play computer games. Who knows, they might even do something creative...

  • 6. Roberto Birquet

    (15 September 2012, 02:47AM)  Complain about this comment

    Not sure the first comment from kawasakifreak makes sense:
    If there are unsustainable levels of debt, they will surely become more unsustainable with lower pay.
    Also, is it truly wealth in the West if there is so much unsustainable debt?
    And if there is high debt, and low pay; actually the social costs are surely going to rise.
    This is the classical error of only looking at the supply side of the equation. And unlike the government, I do not believe that is where the problem lies; it's on the other side, demand.

  • 7. Alastair

    (15 September 2012, 05:05AM)  Complain about this comment

    I am inclined to support Roberto's views. Pareto's 80:20 Principle no longer applies to personal wealth in the West. It now has a 99:1 ratio whereby the wealthy 1% per cent are becoming richer and richer. Trickle down economics is not working at present and 99% of the population are working harder to stand still or even going backwards. Within the 99%, there is a growing shift to the left in the Bell Curve of income distribution whereby more and more of the median part is having to support the lower end of the curve. That is where the money is being sucked out of - to support the "noveau pauvre". How to generate enough wealth to allow the median can support the lower end of the curve is the issue for me. I would be interested in everyone's views on how to achieve that

  • 8. Critic Al Rick

    (15 September 2012, 01:23PM)  Complain about this comment

    @ Alastair

    Good comments, but (as I'm sure you realise) the median is not only having to support the lower end of the curve, it is also supporting the extravagances of the 1% at the upper end of the curve.

    In response to your query "how can enough wealth be generated by the median to support the lower end of the curve?"

    Well, for starters the 1% need to undergo a paradigm shift in attitude and curb their profound greed so they are not parasiting on the median.

  • 9. Mark

    (15 September 2012, 03:23PM)  Complain about this comment

    Alastair,
    As more and more can be produced with less work, it is inevitable that the few left working will have to give more of their proceeds to those who do not work (they do not work because there is nothing we require of them.)
    This doesn't mean that we can't all be better off.

  • 10. Alastair

    (16 September 2012, 12:22PM)  Complain about this comment

    Critic Al Rick
    "Well, for starters the 1% need to undergo a paradigm shift in attitude and curb their profound greed so they are not parasiting on the median." Agreed but my question is now How is that to be achieved?
    Mark, I agree up to "(they do not work because there is nothing we require of them.) an equitable and just society requires a fair distribution of work. Imagine living in a house of 7 or 8 people where only 1 or 2 members of the houslehold did all the domestic chores. Such inequality of division of labour is a recipe for unrest and trouble. Everyone has to contribute unless they are physically or mentally unable is harmony is to prevail within. The same is true of a wider society.

  • 11. JimW

    (16 September 2012, 01:46PM)  Complain about this comment

    From what I read, watch and listen to, the 1% seem to be investing in the emerging markets.

  • 12. Jago

    (16 September 2012, 03:02PM)  Complain about this comment

    After years of artificial growth based on large government debt the UK is undergoing fiscal rebalancing. An unsustainable 7% compound increase in countries GDP equals a 100% growth every 10 years. Successive governments have reduced capital controls to boost the economy causing housing bubbles and unrealistic increases to many of the share values of UK companies.
    The Economist recently published an article with regard to the value of house prices around the globe. The UK is still reckoned to be approximately 20% over valued hence a 20 % deposit required. If bank were to lend 100% mortgages now they would be accused of creating another housing bubble.
    Also many small businesses are not recruiting because of employment taxes and regulation.
    One solution for the UK would be to stop taxing the wealth creation part of the economy and tax public sector pension, E.G anyone receiving more than £10K would be liable to a 50% tax.

    Jago

  • 13. Mark

    (16 September 2012, 05:09PM)  Complain about this comment

    Alastair,
    The key thing about the household is that it can be comunistic because we have sufficient knowledge to know who is capable of what and what their preferences are. For society at large we have to make sacrifices.
    I think the least of all evils would be to provide a minimum for everyone, even at the expense of discouraging people from work. I have a feeling that those who work simply to keep the wolf from the door are not really making a contribution we can't do without anyway and that there are other more important things than service and production

  • 14. Boris MacDonut

    (16 September 2012, 05:16PM)  Complain about this comment

    #12 Jago. Not sure when in the last 50 years the UK saw 7% growth. The Economist article on world HP's is fatally flawed. The rest of the world is 17% undervalued.
    Are you really suggesting Nurses, Fireman etc forego half their pensions to put right the greed of the bankers? You must work for one of Cameron's think tanx.

  • 15. Mark

    (16 September 2012, 05:16PM)  Complain about this comment

    Jago,
    When was the 7 percent annual increase in GDP? I think I missed that one...
    As for anyone earning more than 10k on 50 percent tax.... mad or what...

  • 16. Critic Al Rick

    (16 September 2012, 07:11PM)  Complain about this comment

    @ 10. Alastair

    Sorry; unless the 1% voluntarily accept and deploy a much fairer system of distribution of wealth and remuneration I can't suggest anything other than the judicious use of ropes and guillotines.

  • 17. Jago

    (16 September 2012, 08:34PM)  Complain about this comment


    I do not agree that the rest of the world is under valued. When you have people in good employment who are unable to get a mortgage it would suggest that house prices are over valued.
    Yes bankers acted appallingly, and so have a lot of countries with regard to sovereign debt E.G UK under the management of Gordon Brown.
    Please tell me why nurse, teachers, doctors or many other people in the state sector should not have their pensions taxed? Are you suggesting that only the private sector should carry the burden? Lets compare their comparative situations. For a person in the private sector to receive a £10,000 index linked pension for life, they would have to accumulate nearly £250,000 in their pension pot.
    It is easier to get a public sector job than start up a business, employ people pay employers NI tax, holiday pay, sick pay, maternity & paternity pay also make a product or offer a service make a profit and then pay tax it.
    Tax the non-productive, public sector pensions.

  • 18. Boris MacDonut

    (16 September 2012, 10:53PM)  Complain about this comment

    #18 Jago. All pension income private or public sector is taxed according to the same rules. The first £8,105 is tax free for everyone and then it is taxed at 20%....for everyone. You seem to be suggesting a two-tier tax system where the public sector pensioners are heavily penalised simply for working in the public sector while private pensioners are given tax free status.Or did I miss something?
    #Rick is on the right lines. 1% of people hold 25% of the wealth, look to them and not to dedicated hard working public employees.

  • 19. Critic Al Rick

    (17 September 2012, 04:57PM)  Complain about this comment

    @ 18. Boris

    It shouldn't be:

    Public Sector vs Truly Private Sector


    It should be:

    ([Public Sector - Parasites] +[Truly Private Sector - Parasites])
    vs
    (The 1% (approx) + All Other Parasites)

    UNITED WE STAND - DIVIDED WE FALL

  • 20. Jago

    (19 September 2012, 10:36AM)  Complain about this comment

    Boris
    Yes I am suggesting a two-tier tax system because the people in the public sector continue to have their index linked pension payments subsidised by the taxpayer. This suggests to me that their contributions are inadequate. I think that it is accepted by many people across the political spectrum that public sector pensions are becoming increasingly unaffordable.
    It is unfair that people in the private sector with smaller pension pots have to subsidise public sector pension.

    Jago

  • 21. shortchanged

    (19 September 2012, 02:27PM)  Complain about this comment

    Look around in the shopping malls, the only people spending are pensioners and you want to tax them more. Those with good pensions employ accountants to make sure they don't pay any tax, so the comment that ALL those earning over £8105 pay 20% tax is a fallacy. Besides which,private or public pensions are contribution based and have been paid for over a lifetime of work. Think 50 years in my case. Tax the multi million £ bankers hard, including the shares they are GIVEN as a golden handshake. All pensions should be tax free, as most pensioners spend all they get so helping the economy.

  • 22. Boris MacDonut

    (20 September 2012, 04:37PM)  Complain about this comment

    #20 Jago. Well you are plain wrong. Methinks you read too much Daily Mail and Telegraph. Public sector pensions last year cost about £28 billion of which £24 billion was met by contributions A net cost of £77 per taxpayer. Increased contributions will soon cover that loss. The typical pension in payment is just £6,800 pa. People in the private sector have smaller pots due to a stubborn refusal to fund them properly in the first place.
    Why not increase road tax? It is unfair that non car owners subsidise road use.
    #21. The £8,105 tax free is available to all. Taxable income above that (including pensions) is taxed at 20%. If you made all pensions tax free than the likes of Fred Goodwin would keep millions.

  • 23. shortchanged

    (20 September 2012, 07:46PM)  Complain about this comment

    I don't really care how much some peoples pensions are , if they have paid for it they deserve it. My case is a lot different to Fred Goodwin, my own pension comes from overseas and is only about £13000 a year, so i am not cheering for the millionaires, besides, there are far more people being paid in my range. Taxing the less well off is a favourite ruse by all colours of government, whilst giving money to those that don't need it, google welfare for millionaires, or similar.

  • 24. Alastair

    (21 September 2012, 06:31AM)  Complain about this comment

    Jago

    Wow! 50% tax on Public Sector Pensions over £10k a year.

    That sounds like a plan... for riots!

    And would also be totally unfair on front line public sector retirees.

    However, 60% on those getting a Pension over 75k a year would be a nice try, especially for those Quango people Council and MPs etc on Final Salary Pensions who get big bucks in their last 10 years before retiring

    Alastair

  • 25. Alastair

    (21 September 2012, 06:40AM)  Complain about this comment

    I think there is agreement that increasing tax on "normal" pensioners - whether Public or Private is unfair and bad for the exonomy.

    Would you agree a two tier pension on those guys at the helms of PLC's who get enormous pensions is much fairer? And which political party is like to be capable of introducing such a measure? It is not going to be David Cameron's party. And I doubt very much that MP's will vote themselves a pension cut. Look how they have behaved down the years. Worse than Sir Fred as he is only incompotent while many MP's remain unconvicted of their crimes against the State (expenses scandals etc) and only a few were "sacrificed" to save the many.

  • 26. JimW

    (21 September 2012, 02:13PM)  Complain about this comment

    Not to sure about Sir (is he still Sir?) Fred being only incompetent, some craftiness probably helped.

    After all if RBS had gone bankrupt would he still have received a sizeable pension?

    And he still works, amazingly, as a consultant.

  • 27. Jago

    (21 September 2012, 04:55PM)  Complain about this comment

    Boris. Sorry not plain wrong at all and read a cross section of papers. The average public sector pension is approx £7000 a year index linked. To receive this in the private sectors you would need to accumulate approx £200K, impossible for a person on an average wage in the private sector to achieve. I did initially write that only PSP over £10K should be taxed at a higher rate.
    With regard to motorist being subsidised by non-road users, you cannot be serious!
    I think here you are confused and believe the road tax license to be the only form of tax motorist pay. The premise of my argument is that if you stop taxing the wealth-creating sector you will have more investment, more jobs and eventually an increase in revenue. Jago

  • 28. Jago

    (21 September 2012, 05:13PM)  Complain about this comment

    Shortchanged
    I do not believe that taxing one section of society higher in order that another part can spend it in shopping mails is sound economics. If it were that simple every country in the world would do it and we could all live happily ever after.
    All you are doing is taking money out of the wealth-creating sector, which then has less money to invest and create jobs.
    I think that instead of complaining about the rich you should start up a business make a product or offer a service train people or offer an apprentice, pay employer national insurance tax, holiday pay, maternity leave etc etc.

  • 29. Boris MacDonut

    (23 September 2012, 06:15PM)  Complain about this comment

    #28 Jago. I fear shortchanged is correct. We are consumers now, not workers, so taking from those with too much money and too little demand for stuff and giving it to those who want to shop is exactly what we do need to do. That is why Chinese banks ahave lent so much credit to western people. So we can buy their tat.

  • 30. Jago

    (24 September 2012, 03:42AM)  Complain about this comment

    Boris. So you are advocating that we should take money away from “those with too much money” and give it to people with much less so they can buy products made in China. I think we should do the opposite. How did these people get too much money, by being irresponsible or stupid, or by saving, investing, running businesses and employing people? What do you think makes the most economic sense?
    You can’t tax the super rich because they are non-domicile. The big banks can switch to Singapore, Hong Kong, New York or Switzerland. So lets have less tax on our own British businesses and start supporting them. Tax the private sector pensions. They have already received over generous contribution from the taxpayer and then they are still subsidised after they retire.
    Jago

  • 31. Boris MacDonut

    (24 September 2012, 09:09PM)  Complain about this comment

    #30. Jago. Yes, I am.You spend your way out of recession.Take from the far too rich and give to the spenders.

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