The latest ONS labour market release reveals that in the three months to April the number of people unemployed in the UK was 2.472 million, up by 23,000 on the previous three months (i.e. the three months to January). The rate of unemployment – the number of people unemployed expressed as a percentage of those economically active – nudged upwards to 7.9% from 7.8% in the previous three months.
In a previous article A labour challenge for Osborne we considered the possibility that some of the emerging patterns in the labour market numbers could act as an impediment on the future potential output of the UK economy. The latest figures seem to offer little obvious comfort in this respect. Here, we note three causes for possible concern.
Firstly, we note the continued rise in inactivity. Of those of working age, inactivity rose by a further 29,000 in three months to April to stand at 8.186 million. This is an historic high and equates to 21.5% of the potential working population.
Secondly, we note the continued rise in long-term unemployment. The number of people unemployed for more than one year rose by 85,000 in the three months to April to stand at 772,000. This compares with 399,000 in the same three month period in 2007, just as the first clear signs of the impending financial crisis were being drawn to the public’s attention. In other words, this measure of long-term unemployment has effectively doubled since the financial crisis. But, more than this, 31.2% of those unemployed have been so for at least one year.
Thirdly, we note the high levels of youth unemployment. In the three months to April the number of unemployed people aged 18-24 was 713,000. This was down on the previous three months, but by a mere 2,000. The unemployment rate amongst 18-24 year-olds is 17.3% which is more than double the overall unemployment rate of 7.9%.
Aside from the very obvious personal costs of unemployment and of inactivity, each of these labour market issues poses important economic challenges for the country and its policy-makers. These are difficult challenges at the best of times. But, they could hardly be more difficult given the current national and international economic environment and, of course, the tendency for fiscal consolidation both at home and abroad.
Articles
Unemployment: public sector feels the pain as jobless hits 2.47 million Telegraph, Harry Wallop (16/6/10)
Unemployment: what the experts say Guardian (16/6/10)
Unemployment rises as public sector shrinks Financial Times, Brian Groom (16/5/10)
UK unemployment rises to 2.47 million BBC News (16/6/10)
Unemployment levels a ‘challenge’ for government: Interview with Work and Pensions minister, Chris Grayling BBC News (16/6/10)
Data
Latest on employment and unemployment Office for National Statistics (16/6/10)
Labour Market Statistics, June 2010 Office for National Statistics (16/6/10)
Labour market statistics portal Office for National Statistics
For macroeconomic data for EU countries and other OECD countries, such as the USA, Canada, Japan, Australia and Korea, see:
AMECO online European Commission
Questions
- Evaluate the possible consequences for the UK economy, both now and in the future, of: (i) high and rising levels of inactivity; (ii) high and rising levels of long-term unemployment; and (iii) high levels of youth unemployment.
- Again, thinking about the issues of labour market activity, the duration of unemployment and youth unemployment, what policy recommendations would you make in trying to tackle them?
- If you were writing this blog in a year’s time, what would you expect will have happened to levels or rates of inactivity, long-term unemployment and youth unemployment? Explain your answer.
- Again, if you were writing this blog in a year’s time, would you expect to find any other emerging patterns in labour market statistics? Explain your answer.
It was the 12th May 2010 and George Osborne’s first day as the UK’s new Chancellor of the Exchequer. His arrival at HM Treasury coincided with the latest ONS labour market release. Just in case you were rather distracted by political events, we take the opportunity here to trawl through some of the latest labour market numbers, focusing, in particular, on those that may pose real challenges for George Osborne and the new coalition government.
From the ONS release we observe that in the three months to March the total number of economically active individuals in the UK was 31.340 million. Of these, 28.829 million were employed while 2.510 million were unemployed (but actively seeking work). The number of people employed fell by 76,000 over the quarter (and by 341,000 over the year) while the number unemployed rose by 53,000 (279,000 over the year).
Now we consider the rate of unemployment. The unemployment rate expresses the total number unemployed as a percentage of those economically active. Over the first quarter of 2010 the unemployment rate rose to 8.0%, a rise of 0.2 percentage points on the previous quarter and a rise of 0.9 percentage points from a year earlier. It is the highest quarterly unemployment rate since the 8.1% recorded in Q3 1996.
Next, consider unemployment and gender. Of those unemployed in the first quarter of the year, 61.6% were male and 38.4% were female. The increase in the male unemployment rate during the economic slowdown has been especially marked. The male unemployment rate in Q1 2010 rose to 9.2%, up from 7.9% a year ago and 5.6% two years ago. The female unemployment rate has increased to 6.7% in Q1 2010 from 6.1% in Q1 2009 and 4.8% in Q1 2008. Therefore, over the past two years the male unemployment rate has risen by 3.6 percentage points while the female rate has increased by 2.1 percentage points.
Another troubling issue is unemployment amongst the young. The unemployment rate amongst those aged 18-24 is considerably higher than the overall rate. In the three months to March the unemployment rate for this age group was 17.9% compared with the overall rate of 8%. But, more than this, the current rate of unemployment amongst those aged 18-24 is actually higher than during the early 1990s when it peaked at 17.8% in Q1 1993. The male unemployment rate amongst this age group is especially high having risen to 20.7% in the first quarter of the year, up 2 percentage points on the year and up from 14.2% in Q1 2008. The female rate amongst this age group is 14.6%, up 1.3 percentage points on the year and up from 9.8% in Q1 2008.
Another issue that emerges out of the statistics is the rise in long-term unemployment. The number of people unemployed for more than one year rose to 757,000 in the first quarter, up from 509,000 a year ago and 397,000 two years ago. Perhaps, it is easier to see the magnitude of this problem when we note that 30.2% of those unemployed have been unemployed for at least one year – this is up from 24.5% in Q1 2008. Amongst females, 25% of those unemployed have been without work for at least one year, but amongst males this rises to 33.4%. In other words, one-quarter of unemployed females and one-third of unemployed males are now regarded as being long-term unemployed.
As troubling as these numbers are, the issue of long-term unemployment is one that, over the past two decades, has never really gone away. On average since 1992, 29.4% of those unemployed have been without work for at least one year (34.2% amongst men and 21.6% amongst women).
And now to our final observation: the historically high number of economically inactive individuals of working age. In the first quarter of 2010, 8.166 million of those of working age were economically inactive, up by 86,000 over the year. As a proportion of the working population, this equates to 21.5%, which is not in itself a record high – during 1983 it reached 23.2% – but it is, nonetheless, up from 20.7% a year ago. The inactivity rate amongst those of working age is highest amongst females at 25.9% (up from 25.7% a year ago) compared with 17.4% amongst men (up from 16.1% a year ago).
One factor that helps to explain the overall rise in inactivity is the 43,000 increase in the number of students who have become economically inactive over the past year. But, we also note upward pressures on inactivity over the past year from the increase of 37,000 in the number of people who are ‘long-term sick’ and from the 13,000 increase in the number who feel ‘discouraged’ from seeking work. These pressures highlight some of the many costs that arise from unemployment and potentially raise some tricky policy challenges for the new government.
Articles
UK unemployment rises in first quarter Investment Week, Hannah Smith (12/5/10)
UK unemployment climbs to a 16-year high Irish Independent, Svenja O’Donnell Brian Groom (13/5/10)
UK unemployment increases to 2.51 million BBC News (12/5/10)
Unemployment: what the experts say Guardian (12/5/10)
UK unemployment hits highest since 1994 The Times, Robert Lindsay (12/5/10)
Jobs recovery still fragile, ‘dire’ data shows Financial Times, Brian Groom (12/5/10)
Scottish unemployment rises by 10,000 in three months BBC News (12/5/10)
Unemployment rises to highest level since 1994, ONS says inthenews.co.uk, Sarah Garrod (12/5/10)
Data
Latest on employment and unemployment Office for National Statistics (12/5/10)
Labour Market Statistics, May 2010 Office for National Statistics (12/5/10)
Labour market statistics page Office for National Statistics
For macroeconomic data for EU countries and other OECD countries, such as the USA, Canada, Japan, Australia and Korea, see:
AMECO online European Commission
Questions
- What is meant by somebody being economically active? Do they have to be in a job to be economically active?
- Using the figures in the commentary, calculate the number of economically active people in Q1 2009 and so the change up to Q1 2010.
- If the number of people unemployed rises does this mean the rate of unemployment rises? Explain your answer.
- What factors might explain the persistent problem of long-term unemployment? What policy prescriptions would you offer the new coalition government in attempting to tackle this problem?
- Looking back through the commentary, pick out some of the notable gender differences. What factors might help to explain these?
- Are there any factors identified in the commentary that may be affecting the economy’s potential output?
In the midst of the election campaign we can well imagine that economic data are analysed in minute detail by politicians looking to make political capital. Of particular interest are likely to be the labour market numbers. So here we ‘digest’ a few of the latest numbers from the latest ONS labour market release.
The ONS reports that in the three months to February 2010 the number unemployed in the UK rose above the 2½ million mark to stand at 2.502 million. Of these, 61.2% were male and 38.8% female. The rise of 43,000 on the previous three months (i.e. the three months to November) took unemployment to its highest level since the three months to December 1994.
While unemployment rose, employment fell by 90,000 over the same period to 28.824 million. Of those in employment, 53.2% were male and 46.8% female. Employment levels are now at their lowest since the three months to December 2005. The latest unemployment and employment numbers mean that the number of economically active individuals in the three months to February stood at 31.326 million (53.9% male and 46.1% female), down by 47,000 on the previous three months. Therefore the unemployment rate, which is expressed as a percentage of those economically active, has now edged up to 8% (9.1% amongst males and 6.7% amongst females); it was 6.8% a year ago (7.6% amongst males and 5.9% amongst females) and 5.2% two years ago (5.6% amongst males and 4.8% amongst females).
If we look at the number who have been unemployed for at least one year we see a rather worrying trend with a rise of 89,000 over the past three months to some 726,000. This compares with 486,000 in the same period a year ago and 390,000 two years ago. Another potentially problematic trend is the rise in inactivity rates. The proportion of individuals of working age who are now inactive, so neither employed or actively seeking work, rose to 21.5% in the three months to February (17.5% amongst men and 25.8% amongst females), up from 20.7% in the same period last year (16.2% amongst men and 25.7% amongst females).
Finally, part-time employment fell by 30,000 in the three months to February to 7.671 million. However, it rose by 6000 amongst men to 1.880 million. We now observe that 12.2% of men in employment are employed part-time compared with 43.0% of females in employment. Further, of all part-time workers 24.5% – that’s effectively one-quarter – are male, double the share back in 1984 when these numbers were first recorded.
Articles
UK Unemployment hits 2.5 million mark The Wall Street Journal, Nicholas Winning and Ilona Billington (21/4/10)
UK unemployment at 16-year high Financial Times, Brian Groom (21/4/10)
UK unemployment increases to 2.5 million BBC News (21/4/10) )
Unemployment breaks through 2.5 million Guardian, Graeme Wearden (21/4/10)
UK unemployment surges to 15-year high The Times, Grainne Gilmore (21/4/10)
Data
Latest on employment and unemployment Office for National Statistics (21/4/10)
Labour Market Statistics, April 2010 Office for National Statistics (21/4/10)
Labour market statistics page Office for National Statistics
For macroeconomic data for EU countries and other OECD countries, such as the USA, Canada, Japan, Australia and Korea, see:
AMECO online European Commission
Questions
- The current rate of unemployment is 8%. During the downturn of the early 1990s it peaked at 10.7%. What might explain this difference? Do you think the current rate may have now peaked?
- What might explain the rise in inactivity rates? Does this rise have any implications for potential output?
- Does the rise in the number of those unemployed for over a year have implications for our potential output?
- Go back through the commentary: are there any notable gender differences in the figures? What factors might help to explain these?
- In 1984 part-time employment stood at 4.985 million while currently the figure is 7.671 million. Is it possible to explain this growth in part-time employment in the UK?