Question: why has employment growth collapsed in the first half of the year after recent claims by the Government that 60,000 jobs per year were being created?
The answer lies in statistical misunderstanding, Government spin and the failure of many commentators to read the numbers correctly. For the fact is that the 60,000 job-creation number was never real and the recovery in the labour market is sluggish at best. This post may get a bit involved but stay with me – for this is as much a story about how the recovery is being contrived as it is about bald numbers.
Last year, employment growth suddenly took off. In 2012 employment actually fell by 11,000 – and this was after a loss of nearly 300,000 since the start of the crisis. However, in 2013 everything changed. Employment grew on a full-year basis by 43,000 (this is consistent with claims by the Government who were using quarter-to-quarter figures).
This was quite a turnaround. The Government claimed their policies were working. For many commentators this was proof that recovery had returned. But there were a couple of problems.
- First, this employment growth took place while the economy remained in a domestic demand recession. Given that employment is sensitive to domestic demand, this didn’t make sense.
- Second, the usual pattern of an economy coming out of a recession is that employment growth lags. This is because if there increases in business output, the first beneficiaries are those already in employment; they get an increase in hours which had previously been cut.
- Third, the actual job numbers were throwing up some strange happenings. Self-employment (own-account workers) grew by over 10 percent and made up over half of the total employment growth. At one stage, self-employment was growing by nearly four times the rate of growth during the boom. This didn’t make sense – not with domestic demand stagnation. Agriculture employment showed a similar pattern.
These concerns were dismissed. Government policies were working and critics were just nit-picking. However, the CSO published warnings throughout all last year – warning people against interpreting growth trends. Why? Because they were re-aligning their sample base with the recent Census (don’t forget, the Quarterly National Household Survey is not a comprehensive head-count, just a sample; like a poll). This happens after every Census.