The BBC reports that unemployment has risen at its slowest rate since July 2008. What it doesn’t do is point out why.
One reason is that economic inactivity has increased. People who would otherwise show up in the unemployment numbers have simply dropped out of the workforce.
The number of economically inactive people rose by 50,000 in the three months to June-August for those of working age. (table 1 of this pdf). This accounts for almost all the increased population (51,000) during this time. This represents a sharp change from what happened in the boom. In the three years to November 2007, the working-age population grew by 742,000, but economic activity rose by just 32,000.
In other words, the rise in measured unemployment is being held down by an increase in the numbers of students, home-makers and discouraged workers*. Many of these, though, would like to work. The number of economically inactive people saying they want to work rose by 85,000 in the latest three months**.
Unemployment is also being disguised by greater numbers of enforced part-time workers. The numbers of part-timers who say they’d like a full-time job rose by 53,000 in the latest three months.
If we add together the measured unemployed, the economically inactive who’d like to work and the part-timers who’d like a full-time job, we get an unemployment count of 5.6 million; this is our equivalent of the US‘s U-6 measure of labour under-utilization. That’s 14.9% of the working age population, the highest rate since March 1997.
What’s more, the divergence between hidden and measured unemployment seems to be increasing. In the last three months, hidden unemployment rose 225,000 compared to a rise in measured unemployment of 88,000 - a ratio of 2.5. But in the two years to December 2008, hidden unemployment grew by just 1.4 times as much as measured unemployment. This suggests that the official unemployment figures have recently become an even more distorted measure of excess labour supply.
* Sickness numbers haven’t changed much.
** Of course, you might question how much they really want to work.
One reason is that economic inactivity has increased. People who would otherwise show up in the unemployment numbers have simply dropped out of the workforce.
The number of economically inactive people rose by 50,000 in the three months to June-August for those of working age. (table 1 of this pdf). This accounts for almost all the increased population (51,000) during this time. This represents a sharp change from what happened in the boom. In the three years to November 2007, the working-age population grew by 742,000, but economic activity rose by just 32,000.
In other words, the rise in measured unemployment is being held down by an increase in the numbers of students, home-makers and discouraged workers*. Many of these, though, would like to work. The number of economically inactive people saying they want to work rose by 85,000 in the latest three months**.
Unemployment is also being disguised by greater numbers of enforced part-time workers. The numbers of part-timers who say they’d like a full-time job rose by 53,000 in the latest three months.
If we add together the measured unemployed, the economically inactive who’d like to work and the part-timers who’d like a full-time job, we get an unemployment count of 5.6 million; this is our equivalent of the US‘s U-6 measure of labour under-utilization. That’s 14.9% of the working age population, the highest rate since March 1997.
What’s more, the divergence between hidden and measured unemployment seems to be increasing. In the last three months, hidden unemployment rose 225,000 compared to a rise in measured unemployment of 88,000 - a ratio of 2.5. But in the two years to December 2008, hidden unemployment grew by just 1.4 times as much as measured unemployment. This suggests that the official unemployment figures have recently become an even more distorted measure of excess labour supply.
* Sickness numbers haven’t changed much.
** Of course, you might question how much they really want to work.
Not totally suprising to see the Gov (any Gov!) massaging the figures, but nice precis of what's actually going on. Thanks.
And yes I can see the irony in my chosen moniker.
Posted by: Bored at Work | October 14, 2009 at 02:25 PM
No massaging of figures - this is the ILO standard definition. Not totally surprising to see a blog commenter (any blog commenter) being gratuitiously cynical...
Posted by: john b | October 14, 2009 at 02:30 PM
One reason is that economic inactivity has increased. People who would otherwise show up in the unemployment numbers have simply dropped out of the workforce.
Precisely.
Posted by: jameshigham | October 14, 2009 at 05:49 PM
@john b
Looking at the difference between labour force under utilisation (Chris Dillow's 5.6 million) and the standard unemployment measure is not cynical. It is just proper analysis.
Look ahead. One thing this means is that when standard unemployment figures eventually go down, they are likely to fall very slowly. There will be a lot of people who had temporarily given up actively searching for a job starting to look for jobs again.
Posted by: Diversity | October 14, 2009 at 08:10 PM
A huge proportion of the increase in inactivity is down to students though. In the ONS release on the quarter inactivity is up 50,000 but of this 42,000 are students. Also what further mudies the waters is that a significant chunk of ILO unemployent is actually full time students as fees and debt force students to work a lot more.
Posted by: David | October 15, 2009 at 10:37 AM
Growth of duel income couples? If one loses their job or goes out of business it's often not worth them signing on.
Posted by: Bruce | October 15, 2009 at 01:58 PM
I'm going to put 'economically inactive' on application forms in that rude 'account for time not already accounted for' box and see what happens.
Posted by: Bialik | October 16, 2009 at 05:56 PM
"People who would otherwise show up in the unemployment numbers have simply dropped out of the workforce."
That's me. Laid off last October, signed on and only got JSA for 6 months because I had a few savings. I'm still looking for a job but don't show up in the figures. I've only been paying NI since 1962 so I guess I'm a mug.
Posted by: dave heasman | October 27, 2009 at 04:50 PM