Unemployment falls, but claimant count rises again

Unemployment fell in the three months to May despite the UK's return to recession, figures from the Office for National Statistics showed yesterday. The number of people without jobs declined by 65,000, to 2.58 million, taking the headline unemployment rate down to 8.1 per cent.

The number of people in employment also rose by 181,000 over the three months, reaching 29.35 million. The number of vacancies rose as well, to 471,000, up 12,000 on a year earlier.

The figures were welcomed by analysts. "If the current rate of growth is maintained, employment next month could reach its pre-recession peak. So it's not all doom and gloom out there," said Graeme Leach, chief economist at the Institute of Directors. "You would be forgiven for thinking you were looking at two different economies if you consider either the UK labour market data or the GDP figures," said David Tinsley of BNP Paribas.

But within the ONS release there were also some less encouraging figures. Despite the fall in the jobless rate, the number of people claiming Jobseeker's Allowance rose in June by 6,100, hitting 1.6 million.

Long-term unemployment also failed to fall over the quarter, according to the ONS. The number of people unemployed for over 12 months rose by 3,000 to 885,000, the highest level in 16 years. And the numbers unemployed for more than 24 months rose by 18,000 to 441,000. There are also doubts about the quality of the jobs that the economy is creating. Of the 181,000 new jobs created over the past three months 48,000 were part time.

there were signs that many people were taking these jobs because they could not get permanent employment. Around 18 per cent of the 7.8 million people in part-time work said they could not find a full-time job, up from 14 per cent this time last year.

Some 42,000 of the new jobs created over the quarter were in government-supported training and employment programmes, causing some analysts to suggest the headline figures have been flattered.

"Given the temporary nature of such programmes and relative insecurity associated with them, [this] does not suggest the UK labour market has fundamentally improved," said Melanie Bowler of Moody's Analytics. Another cause for concern in the figures is that the number of hours being worked is rising while output has been flat.

The total hours worked per week was 937.8 million in the three months to May, 26.8 million more than the same period a year earlier.

More hours and stable output means that the productivity of the workforce, which drives improvements in living standards, is falling. The ONS had previously said that output per worker fell by 0.7 per cent between the final quarter of 2011 and the first quarter of 2012.

The latest figures also confirm that real incomes remain under pressure. In the three months to May, average annual earnings were 1.5 per cent higher than a year earlier, still below the below the annual rate of CPI inflation, which came in at 2.4 per cent in June.