David Blanchflower: Cameron's employment claims just don't add up

Economic Outlook: He insists one million jobs have been created; they haven’t

David Blanchflower
Monday 29 October 2012 01:00

My week started with my first-ever earthquake. Turns out it was only a 4.0 on the Richter scale, centred in Maine – but the house still shook and there was a big rumble. One of my Twitter followers from California told me it was nothing more than a "gentle nudge".

Then it was off for a 36-hour trip to Ireland and back: I watched Prime Minister's Questions while waiting in the lounge at Dublin airport on the way home. An obviously rattled David Cameron, who had clearly had a really bad week with his own series of tremors on badgers, whips, energy prices and ticket-gate, seemed to let slip that the gross domestic product data to be released the next day contained good news.

I recall that George Osborne had criticised Tony Blair, saying "important economic data should not be blurted out" when he talked about the unemployment data at a TUC conference ahead of the official release. One lesson I have learned from living in a small New England town is "what goes around comes around". As I discuss below, Mr Cameron has also had trouble with loose talk in regards to the labour market.

Then came the GDP figures themselves, which showed the economy grew by a better than expected 1 per cent in the third quarter. But to put this in context the UK economy is still 3 per cent below its level at the start of the recession in 2008.

As Sir Mervyn King, Governor of the Bank of England, made clear in his speech in Wales last week, "the big picture is that GDP is barely higher than two years ago, and remains some 15 per cent below where steady growth since 2007 would have taken us" – that is assuming the same growth rate achieved in the decade preceding the recession.

Over the past year, there has been no growth at all. The consensus among economists was that this was likely to be a quarter with a short-lived boost because of the extra bank holiday for the Queen's Diamond Jubilee in the previous quarter, which accounts for 0.5 per cent. In addition, even though most of the sales of tickets for the London Olympics occurred last year, by convention they were counted at the time they were used, along with revenue from the broadcast rights – and that accounts for 0.2 per cent.

So the 0.7 per cent suggests that there is no underlying growth. The slowing of the PMIs, an unexpectedly weak manufacturing survey from the CBI and weak scores from the Bank of England's agents – along with further slowing in Europe and low levels of business and consumer confidence – mean it is almost inevitable that the UK will enter a triple-dip recession in the fourth quarter.

I also need to set straight the growing number of false claims about the labour market that Mr Cameron insists on repeating, starting with the claim he repeated at PMQs, that one million private-sector jobs have been created under the coalition; they haven't. In June 2012, some 200,000 workers employed in further education and sixth-form colleges were transferred by the Office for National Statistics from the public to the private sector, so only by cheating is that claim true. The coalition created none of these further education jobs; in fact they have been cutting jobs in the sector, which declined 13,000 since June 2010. Not true.

Second, Mr Cameron has claimed that employment is rising under the coalition. The official labour market figure that the ONS publishes as the "national statistic" comes from the Labour Force Survey and is published, as I illustrate above, as a misleading and meaningless three-month rolling average for both employment and unemployment, which is then compared to the previous three-month rolling average.

It turns out that what happened six months ago is quite different to what is happening now. The official data suggest that employment this rolling quarter (June-August) was 29,590,000 – up by 214,000 from 29,376,000 in March-May. Data by single month that are used to construct these data are actually available on the ONS website, which allows us to unpack what is really going on.

The two numbers above are reported in red in the table so 29,590,000 is the average of the June to August period: similarly 29,376,00 is the average for the March-May period. But the monthly data themselves tell a completely different story of what is going on over the last two months – because employment is falling.

The data for August show employment was actually 29,560,000 – that is 32,000 lower than the July number (29,592), which itself was 27,000 lower than the June figure. Every other advanced country in the world publishes its labour-market data, including the unemployment rate, by single month rather than using these distorting rolling averages. In sum: employment has been falling for the last two months after it reached a possible pre-Olympic peak in June. Don't believe Mr Cameron when he tells you employment is rising; it isn't, it's falling.

Third, he has claimed that employment is at record levels. As the table shows, it was lower in August than it was in July, or even in June for that matter, because as I noted above, employment is falling, not rising. It is true that employment in each of the last three months has gone over 29.5m for the first time, but that arises in large part simply because of the growth of the size of the population aged over 16.

This now stands at 50.59m, the highest it has ever been and up from 50.56m in July and 50.53m in June. Expressed as a proportion of the population aged 16 and over, the employment rate stood at 58.4 per cent in August, which is the same level it was when the Government took office in May 2010. But it is now lower than it was in every one of the 137 successive months under Labour: hardly a great success story. More pork pies. It is about time the government started creating jobs rather than fiddling the statistics.

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