institute for employment studies

press information centre

Largest rise in unemployment since March 1991

17 December 2008

Figures out today from the Office of National Statistics reveal that unemployment has risen by 137,000, and the number claiming Jobseeker’s Allowance in November rose 75,700 to 1.07 million – the largest rise since March 1991.

• Labour Market Statistics, December 2008, Office for National Statistics

Monthly additions to the unemployment registers are now gathering pace considerably, approaching the rates of increase witnessed in the early stages of the recessions in the 1980s and 1990s. Claimant count unemployment for November has shot past the million mark, hitting 1,071,900. This represents an increase of 75,700 from the figure for October. Unemployment is now, according to this measure, 277,000 higher than it was at its lowest point, in January this year. These increases have impacted in every region and country of the UK, though London seems to be slightly less affected. The wider LFS measure of unemployment stands at 1,864,000 for the three months to October, a rise of 137,000 since the previous quarter. Despite this large increase, the figure remains below the level predicted in some of the forecasts.

Nigel Meager, Director of the Institute for Employment Studies, says:

‘The hike in unemployment announced today is worryingly close to the kinds of increases experienced in recessions of the early 80s and 90s. The UK has entered the current downturn in better shape than it was in those days, with lower unemployment, a more flexible labour market and a mobile pool of migrant labour. It is a measure of the severity of the current downturn that these mitigating factors are no longer sufficient to keep the lid on increases in unemployment.

‘Another important consideration is that benefit reforms mean that it is getting much harder for the jobless to drift onto incapacity benefit or other forms of inactivity. The latest welfare reform white paper suggests this trend will be maintained. The effect will be that more of those losing their jobs will show up in the unemployment count than was the case in the 80s and 90s recessions.

‘It is very important to get the right measures in place to help the unemployed through this difficult period. There is a danger that growing pressures on Jobcentre Plus to respond to the rising numbers of short-term unemployed will divert resources from efforts to help more marginalised groups and the harder-to-place. These have been the focus of welfare to work policy in recent years and have begun to achieve some successes, which will now be under threat by the falling labour market.’

Hiring and firing

Rises in the claimant count reflect increased inflows into Jobseekers Allowance that are significantly outstripping outflows into employment. This partly reflects increased redundancies, affecting most sectors. There were 180,000 redundancies in the three months to October, up 41,000 from the previous quarter. There were 520,000 vacancies in November, down 34,000 from the previous month’s revised figure and down 171,000 from the peak in April. These declines have not, so far, affected the public sector, but they have been widely felt across the remainder of the economy, with particularly steep declines in manufacturing and construction.

Nigel Meager, Director of the Institute for Employment Studies, says:

‘A growing pool of unemployed is competing for a rapidly shrinking number of job vacancies. Vacancies have continued to decline, despite the indications that many eastern European workers who filled vacancies at the height of the boom may be returning to their countries of origin. It is important to emphasise, however, that even now, there remain over half a million vacancies in the economy and that, even now, nearly a quarter of a million people are leaving the claimant count each month, a rate similar to that experienced in recent years. These figures suggest that despite the gloomy data on redundancies, many employers are still hiring and labour demand has not completely collapsed.’

Further information

Nigel Meager is a labour economist by training, and a well-established international expert on labour market and employment policy issues. Director of the Institute since 2004, he has a long and varied research track record covering the functioning of national, regional and local labour markets, unemployment, skill shortages, labour market flexibility, changing patterns of work and equal opportunity policies and practices.

For further information or comment, contact the IES press office, or on 01273 678322.