Labour market recovery hits the rocks

Press Releases

12 Oct 2011

All the indicators in today's labour market statistics from the Office of National Statistics suggest further deterioration in the jobs market:

  • The headline unemployment figure from the Labour Force Survey increased by 114,000 over the quarter to August, taking the total to 2.57 million. The unemployment rate, at 8.1 per cent, is now at its highest for over 15 years.
  • Similarly, the monthly claimant count figure (the numbers claiming Jobseekers' Allowance) rose by 17,5000 in September. This is the seventh successive month of increase, taking the total to 1.60 million, and very close to its previous peak in October 2009.
  • Youth unemployment was also strongly up, and approaching the 1 million mark.
  • The numbers in employment fell again (by 178,000 ) in the quarter to August.
  • Job vacancies remained almost unchanged, recording a small rise of 1,000 to 461,000 in the three months to September.
  • Redundancies rose again over the quarter, with the public sector worst affected.

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

‘These poor labour market figures are no surprise given the current economic situation, with GDP stagnant and 5 per cent below its pre-recession level.

‘At the start of the recession, unemployment was the dog that didn't bark, but it's now starting to make quite a bit of noise.

‘Unemployment initially grew less than expected, as many employers hung on to their workers, often through short-time working or pay freezes. Now, however, many firms with their businesses still in the doldrums are having to shed the staff they retained in the early stages of recession. Even those firms whose business is picking up can often still cope without recruiting new staff. The accelerating pace of public sector job loss as the cuts start to bite is clearly making things worse.

‘The latest figures also show the effect of this year's college leavers hitting the labour market. The large rise in youth unemployment is of particular concern. Urgent action is needed to avert more lasting labour market damage, especially to young people, and to those with low skills, who may never fully recover from an extended period of unemployment.

‘Unemployment has been around the 2.5 million mark for nearly two and half years, while vacancies have been below half a million for almost as long. The UK labour market is suffering from chronic lack of demand. Without some stimulus to demand, the idea that private sector growth will quickly compensate for the public sector jobs haemorrhage increasingly looks like sheer fantasy.

‘The government's latest 'plan B' - more quantitative easing and some 'credit easing' - is a step in the right direction. But unless it gets spending power rapidly into the economy, rather than just boosting bank balance sheets, it may be too little too late to stop further surges in unemployment. In these circumstances we also need fiscal measures to inject demand into the economy, and a slowing of the rate at which demand is being sucked out of the economy through spending cuts.’

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The Institute for Employment Studies is the UK’s leading independent, not-for-profit centre for research and evidence-based consultancy on employment, the labour market, and HR policy and practice.