Don't believe the hype on unemployment!

The headline figure from today's statistics is that the number of people claiming Jobseeker's Allowance fell by 32,300 to 1.59 million in February.

But unemployed people not claiming does not been unemployment is going down. A far more alarming statistic is that the number of people in work fell in the quarter, by 54,000 to 28.86 million.

So 54,000 fewer people are earning a wage in February than in January. That is the real statistic. It means less tax revenue into the Exchequer, and less consumer demand in the economy. This is bad news. Until the number of people in work starts rising consistently talk of a recovery is premature.

Another baseline is the continued rise in the number of long-term unemployed (over a year), which rose by 61,000 to 687,000 in February. The social consequences of long-term unemployment have been well-documented by professors Danny Dorling and Richard Wilkinson.

Unemployment stats: then and now

Despite welcoming her to 10 Downing Street within a few weeks of becoming Prime Minister, Gordon Brown (as an opposition MP) once railed against Thatcher's "dishonesty" over unemployment figures.

Looking at comparative statistics though between the ILO unemployment measure and the claimant count (those actually receiving jobseeker's allowance or unemployment benefit as it was) in the mid-80s, early 90s and now reveals how much New Labour's 'welfare reforms' have kept people from successfully claiming.

While it is true that unemployment (on the ILO measure) is currently about half a million lower than in the previous two recessions (2.5m rather than 3m) it is revealing to know what percentage of those deemed unemployed under the ILO measure are receiving unemployment benefits.

In the mid-80s it was 94%, in the early 90s it was 97%, today it is just 65%. So in effect there are today over 800,000 who are unemployed who - for whatever reason - are not claiming jobseeker's allowance.

While New Labour should be pleased that unemployment has not (yet) hit the heights it did in previous recessions, it should be intensely concerned at the missing 800,000.

Unemployment down, Employment down

A complex picture on unemployment was unveiled in the statistics released today for September to November 2009. Total unemployment on the LFS measure dropped slightly by 7,000.

The claimant count of unemployment (those actually claiming Jobseeker's Allowance) fell by 15,200 - which suggests the increasingly stringent conditionality and compulsion is taking its toll on jobseekers.

However, the number of people in work fell by 14,000 in the quarter (to 28.9 million), so where have all these people gone? If 14,000 fewer people are in work and 7,000 fewer are out of work then that's 21,000 missing people . . . surely?

The answer lies in the number of people classed as 'economically inactive', which includes people who have taken early retirement or have given up looking for work. This increased by 79,000 in the quarter to reach a record high of 8.05 million, 21% of the working age population.

But behind the unemployment figures, another picture is emerging - those on involuntary short-time working (i.e. those who have cut their hours to stay in work). Today's figures revealed a fall of 113,000 in the number of people in
full-time jobs, to 21.21 million, compared with a 99,000 increase in part-time workers to 7.71 million.

Falling employment and increasing short-time working means less disposable income which is bound to filter through into tighter consumer spending. Likewise, average pay increased by 0.7% in the year to November 2009, while inflation hit 2.9% in December - further hitting the value of wages in people's pockets.

People falling out of claimant eligibility into the grey or black economy also means tax revenues are hit.

The true picture revealed today is not one of an economy that has 'turned the corner' or is 'on the up', but of an economy that is incredibly fragile.