Commenting on todayís labour market statistics

Commenting on todayís labour market statistics, Ian Brinkley, associate director at The Work Foundation, said:

ëTodayís labour market statistics are bad, but perhaps not as bad as might be feared at this stage of a deepening recession.

ëAs expected, unemployment is rising very sharply – up by 130,000 in the three months to November on the ILO measure to stand at 1.9 million. The unemployment rate is now 6.1 per cent when it was 5.2 per cent towards the end of last year; by next month ILO unemployment will almost certainly move past the two million mark. Some 80,000 more people are now claiming Job Seekersí Allowance, which is a huge challenge for Job Centre Plus, and indeed the benefits system as a whole, to have to deal with.

ëThe surprise in these figures comes from the fact that employment overall seems to be holding up quite robustly, falling by a mere 26,000. There are still some 29 million people in work. The best explanation is that this looks like a temporary blip in the progress of the recession. It could be employers are adjusting by cutting hours or pay rather than shedding jobs altogether so as to avoid losing the longer-term advantage of skills and experience (part-time work is also rising).

So far, people are staying in the labour market rather than dropping out and becoming economically inactive. Jobs are still being generated – for example, there were still over 500,000 unfilled vacancies in the three months to December 2008 (albeit vacancies are falling). However, we should expect job prospects to worsen markedly soon. The number of people wanting jobs is going up faster than the jobs available.

ëSo far, the government has focussed its attention on the financial end of the economy, aiming to get credit moving again. It needs to think more imaginatively and boldly about how to address the problems of the real economy too.

ëThree measures would be helpful:

* It should give further thought to a short-time working programme. This would support employers in avoiding redundancies by enabling them to cut hours, but for the state to step in to make up a proportion of the lost wages through the benefits system.

* The massive rise in claimants that is coming in 2009 will severely test Job Centre Plus. Maintaining the quality of the service for job seekers must be a political priority – especially with the ambitious targets for welfare reform currently in place. A significant increase in financial support in addition to that announced in the Pre Budget Report is likely to be needed.

* The PBR gave 3.5 billion worth of support to public works. There is an urgent need for a much more serious public investment programme. This should be targeted at infrastructure projects that can be set up quickly and so stimulate local labour markets – for example social housing projects.í