Unemployment rises as referendum uncertainty holds back hiring

Wed, 20/04/2016 - 18:27 -- nick

UK unemployment has risen by 21,000 to 1.7 million over the three months to February, the Office for National Statistics (ONS) has confirmed.

This is the first rise since July last year, confirming that the economy is facing difficult headwinds in providing jobs.

Skills shortages in some areas saw smaller drops in worklessness over the last year, and this led to a welcome rise in wages.

This position has gone into reverse, with annual increases averaging 1.8% compared to 2.1% in the previous three months.

The fall in the pay rise level suggests that skills shortages - which usually drive up wages as firms chase the few available employees - are not to blame for the current situation.

Businesses may be adopting a 'wait and see' approach to the upcoming EU referendum, fearing that a leave vote will hobble the economy for years and delaying recruiting new staff until they know the result.

If this is true further rises in unemployment should be expected until the vote is held in June.

Recent news that inflation had risen to 0.5% after months of bumping along near to a zero rate means the gap between wages and inflation is narrowing, and workers are taking longer to claw back their losses during the depression that gripped the UK from 2008.

The number of economically inactive people went down to 8.87 million, the lowest since records began in 1971. It may be that this figure disguises the problems with the work capability assessment which often brings people into the labour market when they shouldn't be, but the biggest contributor to the change was a fall in the number of inactive students.

The problem of self-employment continues to skew the work figures. 4.64 million people hold this status, 120,000 more than a year ago, but with average earnings far below employees this figure includes many people who aren't making a living despite being absent from the unemployment role.

Unemployed people are still reluctant to claim benefits where they can avoid doing so. Of the 21,000 new workless people in the last three months, less than a third (6,700) claimed JSA or ESA, showing again that these benefits, which almost all UK ex-workers are entitled to through paying National Insurance contributions, are now seen as more trouble than they are worth. A sanctioning regime which sees more than twice as many claimants have their income taken away now than in 2010, when the Conservative government first came to power, is surely to blame for this.

The UK is likely to see more problems in its labour market over the next couple of months until the referendum result is known. If Britain leaves the EU after that then all bets are off; some estimates put the number of jobs that are dependent on membership as high as three million, and we can ill-afford to lose them.