Encouraging news on employment; disheartening news on 4G

By Peter Hoskin
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Another month, another set of encouraging employment figures:

• From October to December 2012, the headline employment rate was 71.5 per cent – a 0.3 per cent point rise on the previous quarter.
• A record 29.73 million people were in employment, up by 154,000 from the previous quarter. This also represents a rise of 584,000 over the previous year – the largest annual increase since 1989.
• The economic inactivity rate for those aged 16 to 64 was 22.3 per cent, the lowest level since 1991.
• The unemployment rate was 7.8 per cent; 0.1 percentage points lower than the previous quarter, and 0.2 percentage points lower than the level inherited from Labour.
• Unemployment was down 14,000 this quarter. There were 12,500 fewer Jobseeker’s Allowance claimants.
• Excluding those in full-time education, the youth unemployment rate was down 0.3 percentage points on the previous quarter – although there were 2,000 more unemployed young people.
• Long term unemployment fell by 15,000 on the quarter.

And so on and so on.

But how can the labour market be so buoyant when the economy is so leaden? Again, we’ve been here before. At 1.4 per cent, wage growth is still being surpassed by inflation. And—although today’s figures have it falling by 43,000 on the previous quarter—part-time employment is persistently high. All this suggests that people are accepting lower wages and fewer hours, rather than not working at all.  

In fact, there’s graph in today’s release which suggests just how reliant the economy has been on part-time workers since the downturn struck:

                            Annual changes in the number of people in full-time and part-time employment, seasonally adjusted

The question now is whether these part-time jobs will lead to full-time work as the economy improves.

Considerably less encouraging was the news that the 4G auction raised £2.34 billion – £1.16 billion lower than forecast by the Office for Budget Responsibility. What’s a missing £1 billion when the national debt stands at £1.4 trillion? Well, that £1 billion could be mean difference between borrowing falling this year and not. At the moment, borrowing is forecast to fall from £121.6 billion in 2011-12 to £120.3 billion in 2012-13 – but that assumed the auction would raise £3.5 billion for the Treasury’s coffers. Without that full sum, the difference between the two figures is practically negligible. My former colleague Jonathan Jones provides more detail here, but suffice to say that George Osborne will be hoping for fiscal improvements elsewhere before the Budget is released.

Incidentally, in his appearance on the Today Programme earlier, John Redwood criticised the OBR for being “consistently wrong” with its forecasts – including on the 4G auction. My earlier post stands in response, although there is another, sympathetic point which I’ve made before: the Government should place more stock in the pessimistic—not the central— scenarios devised by the OBR, and others, when it’s coming up with policy.