Unemployment – returning to the 1990s highs

The latest monthly unemployment figures appear, at first glance, to show a mixed picture. But, a rise in one measure and a fall in the other do not mean we can assume that overall things are about the same.

The figure that went up was the internationally recognised ILO measure, which counts everyone who is out of work and looking. It rose by 27,000 to 2.53 million, the highest since 1994 (ah, back to the Major years…) and it was taken in January and the comparison is with December. The figure that went down is the claimant count, those who are on Jobseekers Allowance (JSA). It fell by 10,200 to 1.44 million and it was taken in February and is compared to January.

However, this fall does not necessarily mean that fewer people are unemployed as at February than in January. Why? Well, because JSA is a time-limited benefit for certain types of claimant. You can’t always claim it indefinitely if you can’t find work, you just drop off and onto other forms of benefit. So, the drop of 10,200 is the difference between the number of new claimants and the number of people who:

a) no longer claim because they got a job

b) were dropped from JSA for not looking for work to the satisfaction of the system

c) were dropped from JSA after their period of eligibility expires

Now, if (a) + (b) is still larger than the number of new claimants, then we can safely say that unemployment is falling. The figures that are publicly available don’t go into the level of detail we’d need to know in order to establish what the numbers of (a), (b) and (c) are. However, we do have some hints:

1) The number of new claimants is fairly constant, having been at over 320,000 since last August (between Feb and June last year it was under 310,000 each month). About six months ago, there was a jump of about 15,000 in the number of people joining JSA each month. Many people cease to be eligible after… six months.

2) The number of people who have been on JSA for between six months and two years went up by about 4,000. These would be people who were still eligible. Using (1) as a basis, that suggests that about 11,000 of the extra people who joined the JSA rolls six months ago left it in February.

3) The number of jobs being advertised has not changed by much – it is still around 500,000. Of those, it’s estimated that a fraction are ‘new’ jobs, with most being the result of ‘churn’ when people already in work move to a different role, leaving a vacancy behind them, but removing the one they just took. So it’s unlikely that more people found new jobs if no more were being offered.

So, if no more jobs were around to take than before, and six months on from a jump in the number of newly unemployed we see a jump in the number no longer eligible, it is reasonable to come to the conclusion that at least some of the difference is down to the fact that many claimants were moved on to other benefits after six months, not that they found work. Going by my rough figures (based on the Seasonally Adjusted data available from the Government here), it would appear that the numbers roughly cancel out, that (c) is close to 11,000 and so accounts for most if not all of the 10,200 drop.

Next month’s ILO figures will give a more accurate picture of the overall level of unemployment than the current JSA count (which is why the official unemployment number is based on the ILO measure, to avoid the number being affected by benefit system rules changes).

The main concern is that totaljobs.com are saying that private sector job growth is weak, and this is the year in which we will see lots of public sector jobs being lost. The effects of early and deep spending cuts could well be that growth does stall (we anxiously await the GDP figures that will come out in April to say whether we have grown or have officially gone into a double-dip), which will lead to higher unemployment. What is one problem with higher unemployment? It means that the pressure on government finances will go up, with more benefits to pay and less tax coming in. This is why the coalition’s policy of hitting spending hard to reduce the deficit may prove to be counter-productive. It’s what happened in the 1990s (hence my Major nostalgia at the top).

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