Wednesday, 12 September 2012

The Coalition's jobs record - good or bad?

It's chilly outside today, so just as well I've put my anorak on, made a mug of tea, and had a look at the latest monthly jobs release from the Office for National Statistics (ONS).

The quarterly figures for May-July, showing a rise of more than 230,000 in the number of people in work, are remarkably good, indeed near miraculous for an economy in a double dip recession. Okay, so unemployment fell by only 7,000 but this was dampened by an extra 180,000 people entering the labour market to compete for jobs, so a decent outcome in the circumstances. I've commented elsewhere today on how one might explain this apparent puzzle of 'jobs without growth', which I think is due to a structural change in the operation of the labour market. However, this month's jobs stats are particularly useful since they show what's happened in the first  full  two years since the Coalition government was formed in May  2010.

I hesitate to call this the 'Coalition's jobs record' since it's not entirely clear what if anything it says about the impact of current government policy. But since politicians take both undeserved credit and flak for what happens on their watch, the title seems appropriate. Moreover, given that ministers can at present point to upbeat jobs figures when concerns are raised about the state of the wider economy, it's worth considering just how strong the jobs market really is.

The good news is that there are around 440,000 more people in work than two years ago, despite the public sector having shed 400,000 jobs (adjusting for classification changes which make comparisons tricky). Private sector employment is therefore up by 840,000 - some achievement given that the economy has, according to the ONS's GDP estimates, barely grown at all in that time. Admittedly, much of this extra private sector employment (some 60%) is self-employment, often undertaken by people who would prefer to be in work as employees but for whom 'going it alone', even with all the insecurity involved, is better than unemployment. Many of the new jobs are also part-time and/or temporary, though contrary to popular perception full-time employment accounts for well over half the total increase.

The bad news is that the increase in employment still hasn't been large enough to prevent an overall rise in the level of unemployment, which is almost 120,000 higher than when Mr Cameron and Mr Clegg famously got together in the Downing Street rose garden. And the number of unemployed people chasing each job vacancy has risen slightly too, from a national average of 5.2 to 5.5. Consequently, there is more slack in the labour market than in 2010, which is why so many jobless people are struggling to find work and so many workers feeling the financial pinch because of limits on pay or hours.  Employment may be rising and unemployment falling but the jobs market is still very low on demand, with the 8.1% unemployment rate  probably some three percentage points above what the UK economy could achieve at full capacity. This is an awfully big waste of human resource and output, and crying out for more purposeful policy action.  


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