“Zombie” jobs and questionable numbers: how bad is the UK employment market?

Chancellor Sunak will have eyed today’s job figures with concern

(REUTERS)

The unemployment figures that came out today were predictably bad; but how bad?

First the facts: the level of joblessness hit 5% for the first time since August 2016. The unemployment numbers rose 202,000 in the three months to November, leaving 1.72 million out of work.

The young, those most likely to work in minimum wage jobs in shuttered restaurants and pubs, are the worst affected. That’s a hit to young workers in London in particular, another reason to find the closure of the capital’s nightlife depressing.

Two issues arise (at least).

1) Former Prime Minister Gordon Brown said this week that the extent of the jobs crisis is understated by around 300,000, based on a study by the Alliance for Full Employment.

The official figures just miss some people out, he claims. If he is right, the true unemployment number is closer to two million, or 6%.

2) The furlough scheme, widely praised though it has been, comes to an end in April.

That’s another 4.5 million workers in danger of joining (socially distanced) jobs queues.

Which puts City forecasts that unemployment will peak at 7.5% in the summer at clear risk of looking optimistic.

Many of those on furlough, goes the thinking, are in “zombie” jobs, ones that have no real future and will die once reality bites.

Vacancies, the ONS noted, which were recovering since May, fell in both November and December.

Are the ONS employment stats right?

Paul Dales at Capital Economics says: “There is some compelling evidence that they might not be. To measure unemployment and employment the ONS conducts a survey of a small share of the population called the Labour Force Survey (LFS). It then uses its estimates of the population to scale up the results to represent the whole of the UK.”

So if it surveys 1 million people, it would multiply the number of those people employed by 66 (the UK population is about 66 million) to get a total estimate of employment. But there is some evidence that the UK’s population has declined even though the ONS assumes it has not.

Adds Dales: “That would mean the ONS is overestimating total employment. This would seem to fit with the gap that has opened up between the ONS LFS measure of the number of employees and the HMRC measure of the number of employees.”

Moreover those who are inactive don’t make the list – so an unemployed waiter who isn’t looking for work, why would he?, isn’t officially out of work. If you look at the claimant count – which includes those on low pay and claiming benefits – the unemployment figure is now 2.6 million.

How bad could it get?

Nye Cominetti, senior economist at the Resolution Foundation, said:

“While the labour market continued to deteriorate, the furlough has held back the tide on jobs losses. Around one-in-six private sector workers were furloughed during England’s second lockdown in November, and even more are likely to be furloughed today.

“Young people have borne the brunt of this crisis, accounting for almost half of job losses during the pandemic.

“With the risk of damaging long-term unemployment looming large, particularly when the furlough scheme ends, the Chancellor should use the Budget to help people back into work, and support them through a worrying period of high unemployment.”

How bad are the figures historically?

Well, unemployment was near 12% back in the summer of 1984. The government’s commitment to economic support means no one is predicting it will get close to that this time.

In the EU, the average rate of unemployment is already 8.3% -- many places have it harder than the UK.

And some say today’s data, bad for those affected, isn’t that terrible really.

The furlough scheme and other support deals could see the jobs market and the wider economy bounce back strongly in the summer.

James Smith at ING said today’s data offers “hope that the jobs market stabilised towards the end of 2020 after a turbulent autumn”.

While the pandemic, as the Institute of Directors said, “continues to rip through the labour market”, there remains reasonable hope that vaccine progress could see that what now looks like an inevitable double-dip recession doesn’t have to turn into a jobs massacre.

Julian Jessop, an independent City economist, says too many of us are “too keen to focus on the negatives”.

He said: “The latest labour market data are actually reassuring. I’m now even more confident that UK unemployment will peak below 6% this year and then fall back sharply as the economy rebounds. There is a ‘good news’ story here for those willing to look.”

We’re looking.