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Labour market recovery still fragile

17 March 2010

The ONS March release continues to show how fragile any recovery in the labour market is likely to be. Overall, unemployment has not risen as much as we might have expected, given the depth of the recession. But this also means that employment will only rise very slowly as economic growth picks up. This remains the root cause of the apparently contradictory changes in both the claimant count and the broader unemployment measure from month to month.

John Atkinson, Associate Director of the Institute for Employment Studies, commented on the latest figures:

‘It is encouraging that unemployment has fallen sharply this month, but the underlying growth in vacancies may be levelling off. As a result, it remains the case that positive changes in one month are likely to be overturned in the next, and it is difficult to escape the conclusion that unemployment is likely to remain high without more sustained and substantial economic growth. It is worrying to note that unemployment has continued to rise among people with longer spells out of work.’

Unemployment fell on broader measure for the second consecutive month, with a reduction of 33,000 from the previous quarter. There was also a fall in the narrower claimant count measure of 32,300 between January and February. These falls have been the result of declines in the number of people unemployed for less than 12 months, while the number of long-term unemployed has grown on both measures.

The number of vacancies also rose during this quarter by 39,000 to reach 480,000 in the three months to February, though the month on month figures were stagnant, indicating some slowing of growth.

The figures also revealed that public sector employment continued to grow, increasing by 46,000 in the year to the final quarter of 2009, while over the same period some 527,000 jobs were lost in the private sector.

The number of people in employment declined by 54,000, to reach 28.86 million, and the employment rate of 72.2 per cent was the lowest since November 1996. There was also a rise of 149,000 in the number who are economically inactive. This figure was driven largely by the growth of 98,000 in the number of students. There has also been another increase in the number of inactive people who say they would like work, up by 61,000; the total now stands at 2.3 million.

John Atkinson, continued:

‘These longer-term changes in the labour market show that underemployment remains very high, with significant and sustained growth in the numbers who would seek work if they felt that it was available for them. This seems likely to continue now that the growth in public sector employment is expected to dry up.’

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