November’s labour market statistics show 2009 will be worst for 15 years
This month’s labour market statistics confirmed the upward trend of unemployment, but was not as bad as feared by some commentators.
If current trends continue then unemployment will hit 2.5 million in the Autumn of 2009, the worst for 15 years. The JSA claimant count will hit 1.5 million by the same time.
However, there are signs in this month’s figures that the trend will worsen:
- the recent increases in people leaving JSA has stopped this month
- people are now staying longer on JSA as they find it more difficult to find a job
- economic inactivity due to sickness and ill health has dramatically increased, signalling an increase in Employment Support Allowance in future months
- vacancies show a sharp fall and this fall is likely to increase after Christimas
- these figures are still ‘lagging’ the real economy and many redundancies are still to feed through.
If the trend does accelerate then we would expect unemployment to hit 2.5m in mid-2009, and without more stimulus to the jobs market it could hit 3m by early 2010.
The most worrying factor is a fall in numbers leaving the JSA claimant count. Up to now, the numbers leaving had been going up, as well as the numbers of new claims. This month, the numbers of new claims continued to rise, but the numbers leaving fell.
Download Inclusion's analysis from November 2008
Chart 1: UK unemployment
Unemployment, on the standard measure, rose by 140,000 in the quarter to 1.83 million. But, this covers the quarter to September, and most of the data will have been collected before the banks started collapsing. Even at the current rate of rise we hit 2 million unemployed in the February or March figures.
If, as we expect, the rate of job loss increases, this 2 million figure will be hit sooner. At the current rate of rise, 2.5 million unemployed will be hit in Autumn 2009. While there might not be much time for Government actions to stop unemployment hitting 2 million, there is time for urgent action to slow unemployment growth next year.
Chart 2: Unemployment rates by age
Youth unemployment is rising sharply from a high base. Youth unemployment has risen from 11.9% in April to 13.7% in the latest figures – higher than it was in June 1997.
Chart 3: JSA claimant count - new claims and leavers
The JSA claimant count details show that Government’s first line of defence against rapidly rising unemployment is crumbling.
Chart 4: JSA claimant count
The fall in JSA outflows betrays sharp falls in the rate of leaving JSA for all duration groups, including the shortest term unemployed. As recently as January, more than 58% of new claimants had left JSA within three months. From April to September, 54.5-55.2% were leaving that quickly. The first line was being held. The latest figures, for October, show a rapid fall with only 51.5% leaving.
Chart 5: JSA: claimants staying through each three-month threshold (seasonally adjusted)
This pattern is repeated over all the duration groups we can measure.
Chart 6: Vacancies: whole economy survey
Vacancies show a sharp fall – last month seemed to show a slackening in the rate of fall but this has now steepened.
Chart 7: Inactive, long term sick and IB claimants change (Feb 2006=100)
While economic inactivity shows a very small rise, the most worrying aspect is that the fall in numbers long term sick and disabled has now reversed into a sharp rise. The latest Incapacity Benefit figures out today show continued falls to May. The Economically inactive long term sick figures are more recent, and show a 63,000 rise from May to August – a 3.2% rise. We would expect this to be reflected in the benefit figures. The October introduction of Employment Support Allowance will impact on which benefit is claimed.
Chart 8: UK employment
Chart 9: Employment rate quarterly change in regions - Jul-Sep 2008
Employment is sharply down, for both men and women. Regionally, the employment fall is sharpest in Wales, down 2.0%, in the West Midlands, down 0.7%, the North West, down 0.6% and London, down 0.5%.
Chart 10: Economic inactivity rate change in regions - Jul-Sep 2008
The rise in economic inactivity is sharpest in Wales (up 0.7%), the West Midlands (0.6%), the North West (0.3%) and Northern Ireland (0.2%). In these regions it looks as though the patterns of high inactivity are re-emerging, something not shared with the North East or Yorkshire and the Humber, where employment falls are more reflected in unemployment rises. Wales scores particularly badly for both inactivity and unemployment.
See previous months' labour market analysis here.
