Bill Jamieson: True figures of unemployment are masked by numbers in government sponsored programmes

Published on Wednesday 15 July 2009 22:12

IF there are green shoots of recovery, they are well hidden in these latest unemployment numbers.

The claimant count shows a smaller than feared 23,800 rise in June, to 1.56 million or 4.8 per cent. It is the smallest monthly increase for more than a year.

The International Labour Organisation (ILO) measure shows UK unemployment up by a record 281,000 over the three months to May to 2.4 million or 7.6 per cent. Scotland's ILO count shows unemployment up 73,000 over the year at 179,000 or 6.7 per cent.

Which is right? The claimant count reflects the number of over-18s claiming the Jobseekers' Allowance. The ILO numbers are a survey-based estimate of those who are jobless, irrespective of whether they claim benefits.

Says economist Philip Shaw at Investec Securities: "We suspect that the claimant count is becoming an increasingly unreliable indicator of unemployment. Individuals are taken off the claimant count when they move into other government sponsored programmes such as the New Deal when they are still effectively unemployed, thus biasing the claimant count down."

Are claimants finding jobs? It hardly seems likely. Job vacancies are at a record low.

"The monthly claimant count", says Mr Shaw, "is painting far too optimistic a picture of the labour market. The ILO numbers are far more representative … we are forecasting that these will continue to rise to just under three million by Q2 next year."

And economists for once are agreed on the trend: unemployment is heading relentlessly up, with three million now firmly in sight over the next year.

Charles Davis, economist at the Centre for Economics and Business Research says: "It is hard to see how employment could not still have a significant way to drop, especially in the public sector where the reality of a major deterioration in the public finances had yet to hit bottom at all.

"Unemployment is likely to break through three million in 2010 and continue rising until 2011."

And as long as the jobless total continues to climb, it is hard to see how consumer spending and house market activity can provide much of a boost. The figures also confirm a disconcerting picture of a 'Two Nations' Britain: one where employment continues to grow in the public sector while the private sector is experiencing a severe contraction.

Public-sector employment rose by 15,000 on the previous three months and by 285,000 on a year ago. In the private sector employment fell 286,000 from December 2008 and is down 683,000 from a year ago.

This sense of 'Two Nations ' is reinforced by the higher level of pay rises in the public sector (3.5 per cent) . By contrast, many workers in the private sector (average pay rise 1.9 per cent) have had to accept pay cuts or shorter hours.