Paul Swinney: There is huge variation in the scale of the unemployment challenge that different cities face

Paul Swinney is an economist at the Centre for Cities. Their report 'Cities Outlook 2012' is published today.

Today, Centre for Cities launched our fifth annual index of UK Cities, Cities Outlook 2012. Our report provides a detailed account of how cities are fairing against the backdrop of a sluggish national economy.

This year, the focus of the research has been on how the deteriorating picture of unemployment is playing out in UK cities. And just like the rises in unemployment seen during the recession, further increases are likely to affect cities across the country very differently. For this reason the approach taken to tackle unemployment needs to be aware of its geographic nature.

Cities Outlook, sponsored by IBM and the LGA shows that there are three key points that policymakers should be aware of when trying to deal with unemployment. Firstly, unemployment is particularly an urban issue. Of the 64 cities that we looked at in the report, two thirds of them had a higher number of job seekers than the national average.

Secondly, there is huge variation in the scale of the unemployment challenge that cities face. Cambridge has the lowest number of job seekers of all cities at 1.8 percent in November 2011. Hull, on the other hand, is at the opposite end of the scale – 8 percent of its working age population claimed Jobseeker’s allowance (JSA) last November. And this static picture only tells part of the story – the gap between the claimant count rates of the two cities has doubled since the onset of the recession, increasing from 3.1 percentage points in February 2008 to 6.2 percentage points in November 2011.

Similar patterns are also seen for youth and long term job seekers. Around one in ten young people claim Jobseeker’s Allowance in Grimsby compared to less than one in 30 in York. And there are over 32,000 young people claiming JSA in Birmingham - enough to fill Birmingham City FC’s St Andrews Stadium.

Hull has by far the highest proportion of long term claimants – two percent of the city’s working age population has been on Jobseekers’ Allowance for over one year. This is much higher than in second placed Birmingham (1.6 percent) or third placed Liverpool (1.3 percent). And it is way above the rate in bottom placed Bournemouth, where 0.3 percent of residents are claiming JSA.

Thirdly, even for cities with high numbers of people out of work, the composition of job seekers varies from city to city. In Swansea, young people make up a much higher percentage of the overall number of those claiming this benefit than most other cities – 34 percent of all job seekers in the city are aged under 25, compared to 28 percent in Glasgow. Meanwhile 24 percent of all job seekers in Glasgow have been claiming Jobseeker’s Allowance for more than one year, while this figure is 11 percent for Swansea.

This means that any response to unemployment must consider its geographic nature. Policies to deal with unemployment in Swansea, for example, should focus in particular on the challenges that its youth unemployed face, while action in Glasgow should put a greater emphasis on long term unemployment. For Swansea this may mean providing apprenticeships or work experience, while in Glasgow it could mean addressing long running skills problems.

The Government has already displayed its appetite to take a more city-specific approach to policy making. The announcement of ‘City Deals’ in December is a key part of this. But its response to the recent deterioration in the labour market has been place-blind. November’s announcement of the Youth Contract was admirable, but it took no account of the geographic nature of youth unemployment. Such an approach ignores the greater difficulties that a young person in Grimsby faces in finding a job relative to a counterpart in York. And yet this is a key dimension of the unemployment problem. For this reason, the Youth Contract is likely to be more effective in some places than others.

Of course, ultimately economic growth is required to reduce overall unemployment. And any future growth is likely to play out very differently across UK cities too. Cities such as Edinburgh, Cambridge and London are well placed to benefit from such growth. They are relatively less exposed to continued job losses in the public sector. And they tend to have more dynamic private sectors, measured by their numbers of business start-ups, share of jobs in knowledge intensive business services such as accountancy and finance and a high number of registered patents.

On the other hand, cities such as Hull, Doncaster and Newport are likely to be most vulnerable to further increases in unemployment. Their relatively high exposure to continued public sector jobs losses coupled with their less dynamic private sectors means that these places are likely to find it most difficult to create new jobs in the coming year.

The economic geography of the UK is highly uneven. This means that both short and long term policies should acknowledge this unevenness – what is right for Brighton or Aberdeen isn’t necessarily right for Doncaster or Newport. Any future unemployment policies should reflect this.