Unemployment falls but UK not out of the woods yet

Thu, 19/02/2015 - 14:29 -- nick

Unemployment in the UK fell again in the last three months, seeing a drop of 97,000 to 1.86 million or 5.7% of the workforce.

With the number in work growing by 103,000 between October and December 2014, the labour market looks like it is returning to some measure of health.

One of the big problems of the recession is the rise of fake self-employment, driven by those made redundant who could not find paid work.

This is only now starting to unwind, with a small drop of 19,000 to 4.4 million in the last three months, but still up by 88,000 on the year.

Another criticism of the labour market has been the amount of part-time work created, when most people need to do full-time hours to be able to make ends meet.

In the last year 460,000 more full-time jobs were to be found in the economy while only 192,000 part-time jobs were in place, suggesting some improvement.

However, labour market reports still show more than a million people chasing more hours, and this issue is set to run for a while yet.

There was better news for those in work who saw their wages rise by 2.1% on average, finally outstripping inflation after years of falling living standards.

To some extent this change is expected; there comes a point in every economy where wages are forced up because firms are chasing workers with skills that aren't plentiful, and need to pay more to get them.

There is still a problem with the way wages are calculated by the ONS; they do not include the earnings of more than four million self-employed people who earn less on average than a full-time minimum wage employee, and improvements are likely to be overstated because of this.

Our current historic low inflation rate has been reached almost entirely due to plummeting petrol prices, and these are likely to remain volatile, meaning future prices - and inflation - could easily outstrip wages again soon. Few unemployed people can afford to use petrol meaning their personal inflation rates are higher than many other people's.

Don't forget that the coalition used low wage rises to justify the 1% annual increase in benefits that had spread poverty even further among the unemployed; now pay has seen an improvement will they step away from this measure?

It is vital to understand that a central tenet of this government's thinking on unemployment is that workless people can get jobs easily if they try hard enough. Even leaving aside a mismatch in skills between jobs and potential workers, the huge disparity between the North East, with 8% unemployment even now, and South West, with 4.5%, shows why this shows a lack of understanding of the reality.

The continuing issue of the economically inactive - those who are not in the workplace because they care for others, look after a home full time, are students, are disabled or long term sick - saw a further rise of 22,000, which could be linked to the withdrawal of Atos from the government contract to assess disabled and sick people, meaning fewer are being moved from those benefits into unemployment.

The fall in overall unemployment is welcome, as is the rise in wages, but those who find themselves in the wrong area or lacking skills are still suffering, and there is still too little information on the quality of jobs provided.