Gordon Brown’s great jobs data swindle

By Adrian Ash Oct 31, 2005

Could Britain already be tipping into a serious economic downturn? Something curious has happened to Gordon Brown’s ‘miracle’ economy. It has stopped producing private sector jobs. In fact, it stopped producing them in the summer of 2003.

The national press has yet to report this fact. Indeed, the daily papers and Sunday pundits all cheered last week’s data from the Office for National Statistics. It showed an increase in the total UK employment rate, as well as more people in work than ever before.

New Labour can thus stand by one of its key election slogans: “The lowest unemployment in 29 years.” Yet the ONS press release went on to state that: “The unemployment rate is unchanged. The number of unemployed people has increased, but the claimant count has fallen.”

More people lost their job than managed to find one; yet fewer were claiming the dole. The employment rate rose; but its obverse was unchanged – just how does he do it?

According to the official data, total employment in Britain rose 0.9% during the year to November. The number of people employed by the public sector rose a massive 3.9% – up nearly 260,000 in a mere 12 months. The number of private sector jobs, however, fell by more than 5,400.

This ‘dip’ is not merely a ‘blip’
Five thousand here, five thousand there... who cares about a blip in the data? But as the figures clearly show (and as the chart below illustrates) this dip cannot be dismissed as ‘seasonal’. Private business in Britain has now failed to add jobs for more than a year, the longest period since the early 90s recession.

Nor can this lull be explained away as a result of full employment. If Britain were running at maximum capacity, we would expect private sector wage inflation to be soaring, and tax receipts to be rising, too. But as the recent report from Ernst & Young’s ITEM Club pointed out, “Corporate profitability, investment and tax payments are generally weaker than would be expected given the strength of the cyclical recovery.” Private sector pay rises, meanwhile, have underperformed public sector wages since February 2001.

So how has Gordon Brown achieved today’s record high numbers of people in work? The chart shows that the public sector’s share of the working population bottomed at 22.4% in summer 1998. The number of tax-funded jobs also bottomed back then, some 15 months after Tony Blair first swept to power. At that time, the public sector employed a little more than 6 million people. But over the 12 months that followed, the public-sector head count increased by more than 2%. It then kept rising at that rate annually, until it broke 6.6 million just 5 years later.

In autumn 2003, government hiring suddenly leapt, adding 150,000 names to the payroll in just 3 months, before returning to grow at that 2% annual rate of increase once more. By November of last year, New Labour’s schemes to improve the world – beginning with the abolition of any dip in total employment – had effected a 14.4% increase in the public sector payroll. “More people in work than ever before,” as the Chancellor keeps reminding us.

Musical chairs at the Dole Office
Indeed, “We have more people in work than other countries,” he told Parliament last month, tongue firmly in cheek, “[with] 75% of adults in work compared to 71% in the US, 69% in Japan, 65% in Germany and 63% in France. Social security bills for unemployment are also down by £4 billion a year,” he added. But what Mr Brown forgot to mention was the cost to taxpayers of nationalising the labour force.

Moving Britain’s unemployed from one side of a Dole Office desk... around to the other... might have reduced the official claimant count. But the public sector payroll has now swollen by 940,000 people since New Labour took office. Wage outlays have risen just short of 50% in the same period. The impact on newspaper headlines ahead of the General Election has been dramatic.

Like some hormone-drenched teenager stuffed full of burgers, Britain put on a “growth spurt” in the last 3 months of 2004, the ONS reported this week. The economy added 0.7% between October and December, up from a 0.5% rate of growth over the summer. This takes GDP growth for 2004 as a whole to 3.1%, the best annual figure since 2000. Growth in the final three months of 2004 marked the 50th consecutive quarter of expansion in Britain’s economy.

But the cost of this fraud is staggering. The state’s total expenditure grew more than 6.6% over the same period, and has risen 54% since 1997. And even though the public sector’s spending binge is eating private sector jobs, the headline figures report the longest period of economic growth in 200 years.

Now that’s magic!

Adrian Ash

Adrian Ash is managing editor of the UK Daily Reckoning, and a regular contributor to the Fleet Street Letter - Britain's longest-running financial newsletter - where this article was first published. To read the Fleet Street team's latest investment forecasts for 2005 now, click here.

Employment chart

 


 

Published in Economics | More articles by Adrian Ash

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