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Comment on the latest ONS labour market statistics

12 May 2010

For immediate release: Wednesday 12 May 2010

Lack of job recovery must be prime concern for new government”

Commenting on today’s ONS labour market statistics, Ian Brinkley, Associate Director of The Work Foundation said:

“The new government starts its life with a deteriorating labour market and no sign of a job recovery. Job losses accelerated in the three months to March. Nearly 80,000 jobs went in this period compared with job losses of 12,000 in the three months to December (both measures ILO definitions).
The new government has some difficult balancing acts ahead but a prime concern of any decisions must be the net effect on employment. Even in a “normal” recovery it takes eight to ten years for employment to get back to where it was before the recession. Without a strong employment recovery driven by the private sector the employment recovery could take much longer.

But there may be some comfort for the government elsewhere. The claimant count fell again in April by 27,000, so there will be lower Job Seeker’s Allowance bills. This at least holds out some prospect of a measure of unexpected and painless savings for the new government trying to tackle the deficit.

The last set of public spending plans set out in the 2020 Budget assumed claimant count unemployment would peak at 1.75 million. The current figure is just over 1.5 million. So either the figures will start to move upwards over the coming months, or the Treasury forecast will prove to be too pessimistic.

However, the wider ILO measure of unemployment moved in the opposite direction – rising by over 50,000 in the three months to March. The figures also show a rise in economic inactivity (neither in work or unemployed as defined by the ILO) of nearly 90,000 in the three months to March. Much of the increase in economic inactivity was accounted for by students – more young people are opting for higher education rather than attempting to chase the dwindling numbers of new jobs.

One of the surprises here is that few of the economically inactive say they want a job. But this is not translating into rises in non-JSA benefits as none of the main categories of benefits (such as incapacity benefit or lone parent benefit) show a significant rise in the year to November. In other words there is no evidence of work-shyness here, although we will need more up to date figures to be absolutely sure about this conclusion.

As long as employment goes on falling, tax revenues will not recover – and it has been the collapse in revenues as much as higher spending that has driven the deficit to record levels. If higher education funding is cut too severely and student places fall, young people will flood back into the labour market and push the unemployment totals even higher.”

Ends

Notes to editors
Ian Brinkley is available for interviews and briefings.
The Work Foundation is the leading independent authority on work and its future. It aims to improve the quality of working life and the effectiveness of organisations by equipping leaders, policymakers and opinion-formers with evidence, advice, new thinking and networks. www.theworkfoundation.com.


Media enquiries:
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gbenari@theworkfoundation.com