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Ian Brinkley

Comment on the latest ONS labour market statistics

Authors: Ian Brinkley

16 June 2010

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

“The labour market has stabilised in the three months to April. Total employment and the number unemployed by ILO definitions both went up slightly[1]. ILO unemployment went up by 23,000, taking the unemployment total to just under 2.5 million.

Private sector employment was up, but by a tiny amount. It is still premature to talk about a solid recovery in private sector jobs. So far there is also little sign of significant decline in public service jobs. The main decline was in the publicly owned and controlled banks.

The big challenge for the new government is to avoid large and rapid reductions in public sector employment before private sector jobs start to come through. This is especially important in the regions.”

A new analysis from The Work Foundation (attached) shows that:

Drawing on figures from the recovery in the 1990s and the latest growth forecasts from the Office for Budget Responsibility (OBR), we estimate that by 2015 the private sector could absorb around 500,000 jobs lost from the public sector returning employment to pre-recession levels. But cuts of up to one million jobs would overwhelm any plausible private sector job growth and make the overall recovery in employment far more drawn out.

Cuts in public sector employment could be absorbed by growing employment in the private sector – but only if the pace and scale of change is well-managed and in line with the recovery of private sector employment. As well as managing the cuts in the public sector in a responsible and careful way, the government can help by supporting key potential areas of growth, innovation and job creation in the private sector, such as high value added high tech and related services, advanced manufacturing, low carbon activities, and the cultural and creative industries.

However, if cuts are too big and implemented too soon, the private sector will be swamped, with severe problems amongst those ex-public sector workers whose current skills and experience make it hard for them to take new private sector jobs. New job seekers with the least skills and experience will find it even tougher to find work, threatening persistently high levels of unemployment among the under 25s.

The regions will face a major challenge whatever the level of job loss in the public sector because of uneven over-dependence on public sector employment in the past. The cuts will fall disproportionately on regions with above average levels of public sector employment. Often these regions have weak private sectors that showed slow rates of recovery from the previous recession.

Unemployment will start to fall if job cuts in the public sector are more in line with the lower estimate presented above, but it will take much longer to get unemployment back down if cuts are closer to the top end of our estimates. Unemployment in any scenario is likely to remain above pre-recession levels for many years as the number of jobseekers is expected to grow.


Ends

Notes to editors
1. ILO unemployed includes all those who sought work in the last four weeks and are able to start a job in two weeks time. The much less comprehensive claimant count measure showed a further fall in May, widening the already considerable gap between these two measures of unemployment. Unemployment using the ILO measure and total employment are both increasing because the working age population is going up and new job seekers are still entering the labour market.

2. Ian Brinkley, Charles Levy and Katy Morris are available for interviews and briefings.

3. 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.

4. The Work Foundation will be holding a Post-Budget Breakfast Briefing 23 June 2010 from 08.30 at The Work Foundation 21 Palmer Street.

Media enquiries:
Gideon Benari 020 7976 3584 or 07825 527 040








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