What today's jobs numbers really tell us
I was a little bemused this morning to hear the latest unemployment figures being touted by cabinet ministers as the best in a decade.
Granted: they’re pretty solid, and they show that the labour market is continuing to improve. Unemployment is falling, youth joblessness is down, the total number of people in work is still climbing and the claimant count, an alternative measure which offers an even more up-to-date assessment of where things are going, is also falling.
But are these really the most improved unemployment figures in a decade – as many are reporting? Only if you squint your eyes and look at the figures very selectively.
It is indeed true that overall unemployment fell by 82,000 in the past quarter. It’s true that this is the biggest quarterly fall in simple number terms since May 2001 (though in percentage terms, which are more representative of relative performance, the 3.2% fall is the biggest since 2003).
However, if one compares one month to another – as we do for most statistics – there’s a very different picture. In the month to October, unemployment dropped by only 4,000 across the country. That’s a nothing-to-write-home-about improvement of 0.2%. The previous two months were far more impressive, with the jobless total dropping by 64,000 in August and 13,000 in September.* It’s because of those two months that the quarter-on-quarter fall in unemployment is so impressive.
A similar statistical illusion takes place with the youth unemployment figures. Government insiders claim that the quarterly fall in youth unemployment was the biggest on record.
Again, that’s right only if one looks specifically at the quarterly figures in number terms (72,000; the percentage fall of 7.2% is the biggest since 2000 rather than the biggest on record). In the past month, youth unemployment fell by 18,000 – good but hardly a record. Once again, the quarterly improvement is buoyed up by the big fall (64,000) from a couple of months ago.
But in both cases, the reality is that this was a positive, but basically pretty average, set of employment statistics.
Now, of course all of this is terrifically pedantic. But there’s also an important point. The labour market is still improving, but all the evidence from this latest batch of numbers is that the improvement is starting to tail off. Trumpeting these figures and suggesting they bespeak a labour market which is going great guns is simply misleading.
Moreover, a greater concern for most families is the fact that they are still seeing their earnings squeezed by inflation. Today’s labour market figures showed that the annual increase in the average wage (excluding bonuses) dropped to 1.7% in October – a full percentage point below CPI inflation of 2.7%. In other words, in real terms, adjusting for inflation, families are still facing falls in their incomes.
That’s been the case pretty much since the start of the crisis. And although the Bank of England Governor, Sir Mervyn King, said the squeeze was coming to an end, the statistics contradict him. On the contrary, it is continuing, and although real wages may not be falling at the rate they were last year, they are nonetheless shrinking.
* I should clarify that these figures are actually three month rolling figures, in order to ensure the jobless figures are not overly volatile month-by-month.