Drop in jobless figures sparks fresh row

A fierce pre-election row broke out yesterday as the Labour Party challenged official figures showing unemployment falling by more than 45,000 to a six-year low last month.

The Government pounced on the big decline in the number of people claiming unemployment benefit as further evidence of the economy's strength - one of its key electoral cards. But critics said the effects of the Jobseekers' Allowance and the benefit fraud hotline made the headline jobless total meaningless.

John Major, the Prime Minister, described the figures as a "tonic". "Unemployment is falling right across the country and the smile on Britain's face can broaden," Mr Major said.

But Labour's employment spokesman, Ian McCartney, said the Government's claims were in the realms of fantasy. "Unemployment has struck deep into the heart of middle England," he said.

Labour claimed that 17 significant changes to the jobless definition had reduced the number of claimants by 529,000. The party cited OECD figures showing nearly one in five non-pensioner households in Britain had nobody in work, one of the highest levels in the industrial world.

City experts did not expect yesterday's batch of labour market statistics to affect the Chancellor of the Exchequer's verdict on interest rates at his meeting with the Governor of the Bank of England late yesterday afternoon. Economists agreed that the true unemployment picture was obscure, and were reassured by separate figures showing that earnings growth has remained flat.

The credibility of the headline jobless total has been undermined by a number of independent reports - including one prepared by the Office for National Statistics last year - calling on the Government to measure unemployment by a monthly survey which covers people not eligible for benefit, rather than the number of unemployment benefit claimants. But ministers turned down the advice on grounds of cost.

The fresh row broke out yesterday because the quarterly survey of the labour force showed a much smaller drop in unemployment in September-November than the claimant count indicated.

According to the survey, unemployment fell by only 32,000 during those three months, while the number of claimants dropped by 114,000. Yesterday's figures showed a further fall of 45,100 in the claimant count in December, to 1,884,700.

The Treasury said a divergence between the two measures was not unusual, and they tended to move together over time.

However, the claimant count has been artificially reduced since the autumn by the introduction of the Jobseekers' Allowance (JSA) and the fraud hotline.

The JSA has taken at least 10,000 off the unemployment register, while there have been 135,000 calls to the hotline. But the ONS said it was not possible to estimate the full size of the impact yet, and statisticians also declined to put a figure on the current trend in unemployment.

Other evidence suggested that the labour market is not picking up as much as the headline unemployment total would indicate. In particular, average earnings grew at an underlying rate of 4 per cent in the year to November, the same as the previous four months.

On the other hand, the quarterly labour force survey showed a strong expansion in employment in September-November. The number of people with jobs rose by 130,000.

Unusually, this was mainly due to a rise in the number of full-time jobs. Of the 283,000 new jobs over the year to November, just over half were part-time.

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