Wednesday, 26 February 2014

Getting the true picture of unemployment

Are you fed up of the endless arguments between Government and Opposition where the former emphasises that the employment situation is getting better whereas the latter stresses that the unemployment situation is getting worse?

In theory, because of the old adage of lies, damn lies and statistics, both arguments could be correct.   If the labour supply increases more than employment, government could boast of increased employment and the opposition could point out increased unemployment.

To avoid this statistical conundrum one has to avoid going by registered employed or unemployed and read the situation through the Labour Force Survey which rides over the erratic registration issues and looks at employment and unemployment in toto, irrespective of whether registered or not.

To give an idea about the difference in results produced by different methodologies just see these figures both related to September 2013:

                                     Labour Force Survey Q3/2103     Registered Statistics September 2013

Employed                                        179476                                          157684
Unemployed                                      12827                                              7619

Labour Supply                                 192303                                          165303

What this basically means is that over and above registered workers there additonally are some 21792 productively employed, but unregistered and therefore paying no payroll taxes or national insurance.    It means there are a net additonal  5208 unemployed persons  who wish to work but are not registering with the ETC.   It also means that our labour supply is 27000 (16%) greater than official registered records indicate it is.

So politicians of left or right should stop singing from the hymn book that suits them, which gives a very incomplete picture of the employment situation, and instead interpret employment data from the Labour Force Survey (LFS)which is more complete and consistent.

The last LFS is for Q3/2013 and in comparison to Q3/2012 the situation is :

                                                                     LFS Q3/2103            LFS Q3/2012

Employed                                                          179476                    174126
Unemployed                                                        12827                      12283

Labour Supply                                                   192303                   186409

This shows that unemployment has held steady in absolute terms even though the Labour Force increased by 5894.   In percentage terms the unemployment as a percentage of the labour force kept steady from 6.59% to 6.67%.

In September 2013 the present government had been in office for just 6 months.   It is doubtful whether in the first 6 months any government can do anything material that translates into noticeable differences in the rates of employment / unemployment, although the very removal of uncertainty of  elections help to stimulate job producing investments.  In fact jobs increased in the 12 months to September 2013 by 5350 compared to 3660 in the previous 12 months.

It is too early for the government to take credit for job creation as well as for the opposition to pin fault on government for what they perceive as rising registered unemployment.   Generally such increase in registered unemployment in the context of increasing employment is sign of people who had stopped registering coming back on the labour market as they perceive better employment prospects.

But for the real analysis of government labour policy effectiveness we have to await a few more LFS quarterlies.

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