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Strong set of employment data, but problems remain

Nye Cominetti

18 December 2013

This morning’s (Wednesday 18 December) employment data from the ONS shows strong signs of recovery. In the three months to October unemployment was down by 99,000, overall employment up by 250,000 and economic inactivity down by 45,000 compared to the previous quarter. The unemployment rate is now 7.4% - almost the same rate as early 2009 – and approaching the 7% mark at which the Bank of England may raise interest rates. 

This data is encouraging. Unemployment rates changed very little between summer 2012 and 2013, but it now appears that stronger output growth is feeding into the jobs market. 
However, despite these promising figures there are still doubts about whether the UK’s recovery is benefiting all people and all places. Pay growth is still lagging behind inflation - meaning living standards are falling. Total pay rose by 0.9% year to year, compared to inflation of 2.2% over the same period. Productivity is also a problem, with the number of hours worked rising faster than output. 

The national picture also hides some stark regional variations. The unemployment rate in the East and South East are 5.6% and 5.8% - only just above the rate of the UK pre recession. The unemployment rates in the North East (10.1%), West Midlands (8.8%) and Yorkshire and Humber (8.6%) are all much higher – though encouragingly the unemployment rates in those places did come down in the last quarter.

Furthermore, we need to be cautious about the youth unemployment data. The unemployment rate among 16-24 year olds for the three months to October is 20.5%, down 0.5 percentage points from the previous quarter. This is encouraging, and may show that young people are finally benefiting from jobs growth. However, with 940,000 young people are still out of work,  it is still  too early to declare an end to the UK’s youth unemployment crisis.  

Read more about our Youth Unemployment research here.