A small drop in joblessness driven by a rise in underemployed part-time workers combined with stagnant pay growth, means that the underlying employment situation is ‘worse than at any point in at least the past two decades”.
According to figures from the Office for National Statistics, UK unemployment fell by 45,000 to 2.63 million in the first quarter of the year, a decrease of 0.2% to 8.2% of the working population.
The number of JobSeekers’ Allowance claimants likewise fell by 13,700 between March and April as did the number of people who were economically inactive.
This means that the drop in the worklessness rate was brought about as a result of more people entering the labour market than dropped out of it – a situation that was helped by the creation of 105,000 new jobs.
On the downside, however, the drop in unemployment was almost entirely caused by an increase in the number of part-time employees, a figure that rose 118,000 during the quarter. Conversely, the number of full-time workers dropped by 13,000 over the same period.
As for pay, this remained flat, growing only 1.6%, or 0.5% lower than the year-ago quarter. When combined with inflation of 3.5%, this meant that real incomes fell.
Weak labour market
As a result, Daniel Soloman, an economist at the Centre for Economics and Business Research, was downbeat about the figures.
He pointed out that “weak private sector job creation” was not proving enough to outweigh public sector job losses, which the Office for Budget Responsibility predicted would continue to fall by 730,000 between 2011 and 2017.
“On the face of it, today’s reported declines in unemployment are encouraging. But scratch the surface and the real story is much less inspiring,” Soloman said. “Job creation was driven exclusively by rises in part-time employment and real spending power is falling.”
To make matters worse, ongoing public sector spending cuts meant that today’s falls in unemployment could be reversed over the coming months, he added.
John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, was similarly lacking in optimism. On the one hand, a weak labour market, characterised by people managing to avoid the dole by doing part-time odd-jobs, might be able to prevent unemployment hitting the three million mark, he said.
On the other, “the combination of a growing army of underemployed odd jobbers, 2.63 million people unemployed and pay rises still lagging well behind price inflation suggests that the underlying employment situation is worse that at any point in at least the past two decades,” Philpott warned.
