institute for employment studies

press information centre

Labour market slump worsens

16 November 2011

Today's figures from the Office of National Statistics confirm that the labour market remains very subdued, although some indicators are less negative than commentators expected:

• The headline unemployment figure from the Labour Force Survey increased significantly by 129,000 over the quarter to September taking the total to 2.62 million, its highest level for seventeen years. The unemployment rate stands at 8.3 per cent.
• Within the overall figures for unemployment, youth unemployment was also strongly up, and has now breached the symbolic 1 million mark.
• Similarly, the monthly claimant count figure (the numbers claiming Jobseekers' Allowance) rose by 5,300 in October. Although this was a smaller increase than most commentators anticipated, it is the eighth successive month of increase, taking the total to 1.6 million.
• The numbers in employment fell again by nearly 200,000 in the quarter to September.
• Job vacancies remained largely flat, recording a small rise of 7,000 to 462,000 in the three months to October.
• Overall redundancies fell slightly (by 7,000) over the quarter to September, although public sector redundancies increased.

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

‘These poor labour market figures were to be expected, with the economy stagnant and GDP still four per cent below its pre-recession level.

‘The growth in youth unemployment continues to be a source of grave concern. There is a debate about changes in the way in which the figures are collated, and the inclusion of some groups of students. What is clear, however, is that the number of youngsters struggling to find a foothold in the jobs market is at its highest at least since the 1980s. This is storing up trouble for the future and raises questions about the wisdom of the government's axing, earlier this year, of the Future Jobs Fund, targeted at precisely this group of young people.

‘While it may be tempting to blame the latest poor labour market figures on the Eurozone crisis, there is no evidence whatsoever for such a conclusion. The labour market has been in the doldrums since well before the problems in the Eurozone kicked off. Unemployment, having grown dramatically in the first year of the recession to Spring 2009, has remained stuck in the 2.5-2.6 million range for the last two and a half years. Similarly job vacancies, having fallen rapidly in the first year of the recession, have remained flat at around 450,000 for the last two and a half years.

‘What is true, however, is that the Eurozone problems are likely to reduce the chances of an early labour market recovery. The risk is that their impact on business confidence will further reduce demand from private sector employers, at the same time as the public sector jobs cuts really begin to bite.

‘Looking ahead, the picture remains unclear. There has been a spate of recent reports showing limited hiring plans in the private sector, and the underlying level of demand in the labour market remains very subdued, with nearly six unemployed to every vacancy. Having said that, the picture of labour demand emerging from these latest figures remains flat, rather than showing any great deterioration, with vacancies slightly up, redundancies slightly down, and a small increase in the total number of hours being worked.᾿