The number of people claiming jobless benefits has shot up to its fastest pace in almost two years, but the overall measure of unemployment has fallen to its largest quarterly drop in 11 years. Why?
By Louisa Peacock, Jobs Editor
Today's unemployment figures paint a mixed picture of the UK economy. On the one hand, unemployment as measured by the ILO has fallen dramatically by 88,000 to reach 2.43m, the largest quarterly drop in 11 years. However, the number of people claiming jobless benefits has risen far more than expected, by 19,600 in May – more than double forecasts for an increase of 7,000.
How can one measure of unemployment go up while the other go down?
If you read between the lines, you can attempt to explain both. The ILO measure of unemployment, which is based on a survey of Britons in the three months to April, shows a huge drop in unemployment. At first glance, you could say this means employers are creating enough jobs to offset public sector redundancies. But this drop in jobless numbers can, actually, largely be attributed to an increase in the number of people going into full-time study, and the number of people working part-time because they could not find a full-time job.
Youth unemployment fell, but the increase in young people studying has helped edge the "inactivity" rate up. Some 80,000 more students were not active in the labour market in the three months to April, to reach 2.29m. The total number of 16 to 24 year olds in full-time education increased by 61,000 on the quarter to reach 3.08m.
The number of people working part-time also rose by 31,000 to 7.95m, while those with second jobs remained high at 1.15m, suggesting hundreds of thousands of people are "underemployed".
As to the claimant count, the figures rose unexpectedly to reach 1.49m. However, the figures are skewed by a change in the way benefits are calculated. The Government is moving thousands of people off incapacity benefits (where they would have been out of work anyway) onto unemployment benefits, known as Jobseeker's Allowance. The switch is causing the number of people on the dole to rise dramatically.
If you were to take out the distortion, from part-time workers and students in the ILO measure, as well as the change in benefits in the claimant count, what you are left with is a "flat" employment market. One that is holding up given the severity of the economic crisis, but one that still remains fragile.
It is unclear whether the private sector can absorb the job losses from the public sector – still to take their toll on the labour market.
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