Amid the looming dark clouds a jobless ‘miracle’

“This is a miracle,” was how one of the UK’s foremost unemployment experts, Paul Gregg, described today’s shock improvement in the labour market.

Professor Gregg is not one of those academics prone to hyperbole. He is a former government adviser, but nobody would doubt his independent credentials.

So a measure of unemployment is now going down, the wider ILO measure which lags by a month is stabilising employment is up.

Public sector employment is up, of course. But private sector employment is also up. Vacancies are up. Oh yes, before you start on this being a Christmas temporary boom, the numbers are all seasonally adjusted, so this takes that into account. Much of the increase is driven by a huge surge in part time employment.
 
So I was wondering why at a gathering of the economic establishment last night, the Bank of England governor, Treasury officials and independent experts were rather chirpier than I expected. (I’d put Mervyn King’s mood down to Aston Villa’s surge up the league tables).
 
Now we are beginning to know why.

As I pointed out in August, there had already been a growing economic cluedo about the “phantom jobless” over why employment had not fallen much further given the calamitous contraction in the economy.

Mervyn King had mentioned this phenomenon to me in August. The Bank of England produced this graph last month:

But it is astounding that any measure of unemployment would actually be falling by now.

If, as we expect, the economy has just about started to grow, it would be virtually unprecedented to see unemployment begin to fall at the same time.

The peak in unemployment normally occurs at least six months after a recession ends. So 18 months into our worst recession in living memory we have a previously unheard of turn in the labour market.
 
So what’s causing it, and can the government take credit for it?
 
Unemployment experts point to the fact that a huge chunk of the jobs lost in previous recessions, were older workers who were funnelled into early retirement.

That is more difficult now. There has been a sizeable rise in part time working that might have been aided by tax credits. Workers, like the shop floor workers that I met at Honda, are more willing to cut their hours than see their colleagues’ lose their jobs. And perhaps the government have kept on to public sector jobs more than in previous recessions.
 
However two dark clouds loom.

Firstly youth unemployment is still rising. However many people are unexpectedly keeping their jobs, the state of those trying to enter the labour market is chronic.

Also the fear might be that the job shedding we have not had will simply be delayed into next year – that there will be a painful second leg of joblessness. Productivity is also tumbling in the UK, whereas it has surged in the US.
 
At the Bank of England and the Treasury, they will see some vindication in their economic strategies so far. 

Yes they may be partly to blame for the downturn. But the extent of unemployment has undoubtedly been contained by their actions.