Unemployment falls as growth forecast is cut

The jobless total in the quarter to March was the lowest since last summer, while the number of people claiming jobseeker’s allowance last month was down by 13,700 to 1.59 million.

The UK’s unemployment rate fell by 0.2 per cent to 8.2 per cent, lower than the European average of 10.2 per cent.

However the most recent labour market figures were released amid more pessimistic warnings from the Bank of England. It said that the UK economy will not return to pre-financial crisis levels until 2014 and cut its growth forecasts for this year to 0.8 per cent, from 1.2 per cent.

What the latest figures show is lower pay and more insecurity, which sounds like bad news, but it is a lot better than the alternative, which is mass unemployment. We are sharing the pain. Jonathan Portes, NIESR

Bank of England governor Sir Mervyn King said the eurozone crisis posed the biggest threat to the UK’s recovery and warned of the “risk of a storm heading our way from the continent”.

He said: “We have been through a big global financial crisis, the biggest downturn in world output since the 1930s, the biggest banking crisis in this country’s history, the biggest fiscal deficit in our peacetime history, and our biggest trading partner, the euro area, is tearing itself apart without any obvious solution.”

David Cameron added to the worries about the eurozone, saying it faced a “make-up or break-up” scenario.

The rate of inflation is also expected to fall more slowly than previously thought, remaining above the government’s 2 per cent target for at least the next year. The bank’s scaled back growth projections follow official figures showing the economy had slipped back into recession in the first quarter of the year.

Rise in part-time work

While the number of people in work increased in the last quarter by 105,000, this was entirely due to a rise of part-time workers.

Around 8 million people are now in a part-time job, the highest since records began in 1992, and 18 per cent of this group are in part-time work because they couldn’t find a full-time job.

Changes to the kind of work now available to job-seekers is also reflected in the rise of self-employed workers to a record figure of 4.1 million, up by 89,000 in the last quarter.

The headline figure of a rise in employment disguises some underlying weaknesses, said Ian Brinkley, director at The Work Foundation.

“The economy is still shedding full-time jobs, with all the increase accounted for by part-time work,” he said. “The latest figures confirm that ‘underemployment’ is emerging as a significant problem in the UK labour market, with the number of people in part-time work because they could not find a full-time job up by 33 per cent over the past two years.”

Unison leader Dave Prentis said the trend reflected the fact that the UK still faces the worst jobs crisis in a generation: “A huge growth in part-time working and in people accepting lower pay is masking the real impact of austerity. No wonder growth has stalled and we are back in recession.”

Read more: Should we be cheering the fall in unemployment?

A ‘flexible’ labour market

Against the backdrop of a weak economy and uncertainty further afield in the eurozone, the fall in UK unemployment shows that the labour market is “performing very well”, despite a drop in average wage and an increase in part-time work said Jonathan Portes, NIESR director.

“It’s a very flexible labour market that is responding very well in the circumstances,” he told Channel 4 News.

“What the latest figures show is lower pay and more insecurity, which sounds like bad news, but it is a lot better than the alternative, which is mass unemployment. We are sharing the pain.”

The labour market is ultimately dependent on the wider economy, and the trend of falling unemployment is unlikely to continue if things get worse. “But in policy terms, we shouldn’t be worrying too much about the labour market,” Mr Portes added.

Youth unemployment falls

There was good news for the 16-24 age group, with unemployment falling by 17,000 over the last quarter to 1.02 million.

The so-called claimant count last month also fell by 13,700in the biggest drop since July 2010.

Rise in long-term unemployment

But other figures from the Office for National Statistics showed that the number of people unemployed for more than a year increased by 27,000 to 887,000, the worst total since 1996.

The latest figures confirm that ‘underemployment’ is emerging as a significant problem in the UK labour market, with the number of people in part-time work because they could not find a full-time job up by 33 per cent over the past two years. Ian Brikley, The Work Foundation

In the three months to March, a third of all unemployed people had been out of work for more than a year; the number of unemployed for more than two years rose by 5,000 to 428,000.

Shadow Work and Pensions Secretary Liam Byrne, said: “it is really worrying to see the soaring long-term costs as the number of long term unemployed surges towards the one million mark – the highest since the Tories were in government last time.”

The government’s Work Programme was intended to tackle long-term unemployment specifically, but the most recent figures show it is not working, Mr Portes told Channel 4 News.

“We had done very well in reducing those numbers, and it’s now going up again,” he said. “It suggests that there’s something wrong with the Work Programme.”