How can unemployment be dropping at the same time as claims for joblessness are rising?

Today, the government was very pleased to announce, on the BBC and in all the usual right-wing rags, that the number of people out of work in the UK has fallen to its lowest total for more than a year – 2.51 million or 7.8 per cent of the working-age population.

But the claimant count – which tracks the number of people receiving Jobseekers’ Allowance and is the most timely measure of employment – rose by 10,100 last month, the largest increase since September 2011, as reported by the BBC and The Guardian.

Both figures were released by the Office for National Statistics, which seems to be treading on territory that is practically owned by the Office of Budget Irresponsibility.

Are you as confused as I am?

How can unemployment be down when more people are claiming for it?

No explanation.

It’s interesting that long-term unemployment has increased by 12,000, meaning those out of work for over a year now number 894,000.

Part-time employment rose by 49,000 to 8.1 million, more than a quarter of the workforce and close to a record high.

The fall in unemployment has been attributed to a reduction in youth unemployment, but that still leaves 963,000 people, aged between 16 and 24, looking for work.

Most tellingly, average incomes rose by 1.8 per cent for the year to date, while inflation measured according to CPI is now 2.7 per cent. According to RPI, it’s 3.2 per cent. That means the spending power is falling.

Economists say the job market is worsening, possibly as people who were hired for the Olympics, and other summer events, come off firms’ books.

Bank of England supremo Mervyn King said the figures suggested the labour market was “pretty strong” but said it was hard to reconcile this with the economy’s weak growth.

I’ve got a pretty good idea about that, Mervyn.

The economy is growing slowly because the vast majority of people aren’t being paid reasonably by their employers. Wages have grown by almost (or more than, depending which yardstick you use) a whole percentage point less than inflation. People don’t have the money to spend!

If the economy is to enjoy real growth, then the government needs to launch a major attack on tax avoidance and tax havens, get that money back into the UK Treasury where it belongs, and then use it to invest in British infrastructure and British business. That way, firms can get back on their feet and will have no excuse not to pay a living wage to workers. Then working-class people – the vast majority of the population – will have a higher disposable income and therefore more spending power (they’ve hardly got any to spare at the moment). They will use that money; it will go around the system again, and the economy will grow again.

If I can see that – and I’m no economist – why can’t you? Why can’t Gideon George Osborne?

I think we all know the answer to that. He can.

But it suits his purposes to ignore it.


  1. Thomas G Clark November 14, 2012 at 9:38 pm - Reply

    Another great post mate, really good analysis,lots of evidence and a great question.

    I’ll be using it in the article I have in mind, it presents loads of the specific evidence I would have had to have gone searching for. You’ve saved me probably a couple of hours by compiling it here so thanks for that.

  2. Kris November 14, 2012 at 11:39 pm - Reply

    It’s worth noting that many of these JSA claimants will have been moved over from other benefits, especially ESA. It’s perfectly possible to have high employment and an increase in benefit claims, especially where a particular industry or group is affected by the economic conditions. So, employment figures and claimant counts aren’t always complimentary. The rise in part time, less sustainable employment and long term unemployment is telling, as is the olympic ‘donut’ effect – the South may have seen short-term unemployment growth, but this isn’t mirrored anywhere else, and is highly unlikely to last. These aren’t green shoots then, barely seedlings in reality, and no amount of massaging of the figures can convince me that the economy is anything other than stagnant.

    • Mike Sivier November 15, 2012 at 12:21 am - Reply

      Thanks for that, Kris. It really shows how many different things are going on here, doesn’t it? I mean, I knew that people on ESA were being pushed onto JSA – if you’re in the work-related activity group, and haven’t got into a job after a year, that’s what happens. It’ll happen to my girlfriend next year (probably). But I didn’t equate that with what’s happening with the unemployment figures.
      It IS still about massaging figures, as you rightly point out.

      • Hugh Small December 20, 2012 at 12:33 pm - Reply

        Mike, re: your comment on Mervyn King’s inability to reconcile weak GDP growth with rising employment. I boggled at your suggestion that the solution was to pay people more, because it’s so obviously a good idea, whatever the reason for the economists’ failure to make the sums work. It solves King’s problem, as a ‘balancing item’. You might not even have to work out how much to pay to whom. Simply increase the minimum wage by monthly steps until GDP is in line with employment. The pay increases would probably trickle upwards through the economy for competitive reasons but before they reach the top earners the magic will have worked.
        By the way Mervyn King’s dissatisfaction seems to be causing a ‘blame game’, e.g. some accuse the ONS of incompetence in measuring GDP. The problem is known in official circles as ‘productivity puzzle’ or ‘productivity conundrum’. It’s worth googling if you like to see economists in disarray. The symbolic significance of the word productivity is remarkable. I am working on a solution to the puzzle based on the fact that GDP doesn’t measure material wealth creation. Everyone goes on about GDP’s failure to measure welfare, which obscures the fact that it may not even do what it says on the tin. My hunch is it was only designed to measure ‘GDP growth’ and when that stops due to natural causes absolute GDP means nothing. For the reasons why growth stops, see my web site matureeconomy dot org (not as pretty as yours, congratulations!)

  3. hughsmall February 17, 2013 at 11:07 am - Reply

    Breaking news … one reason that GDP seems to be flatlining is that it’s being measured wrongly. The official underestimate of GDP growth has led people to believe that workers are not ‘productive’ enough. The view that the economy is ‘flatlining’, promoted by all the main parties, helps to dampen pay expectations and reconcile the country to austerity. See “Solving the Productivity Puzzle – and how to ‘game’ the GDP calculation at

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