Unemployment statistics are often interpreted as an indicator of a nation’s overall health and prosperity. Unemployment is inevitably and inextricably linked to economic performance; in times of recession, employers will resort to reducing their workforce in order to sustain their finances. In the UK this mechanism first became evident during 2008, when unemployment figures began to rise as a consequence of the growing global financial crisis.

Whilst Britain continues to endure recession and economic uncertainty, recent unemployment figures have shown an unexpected downward trend. Whilst some observers have been quick to cite Britain’s hosting of the Olympic Games and the additional – if temporary – employment this has created as the underlying factor for this downturn in unemployment, others believe that it may be an initial indication of the UK’s recovery. Subjective interpretation of current UK unemployment statistics could lead to false optimism; what’s the real outlook?

How are UK unemployment statistics arrived at?

The key to interpreting UK unemployment statistics is an understanding of what unemployment is and how the monthly unemployment statistics are produced. In accordance with the International Labour Organisation’s definition, agreed in 1982, an unemployed person – for statistical purposes – is someone who does not currently work in paid employment but has actively sought work in the last four weeks and is available to begin employment within two weeks, or someone who has found a job in which they will begin employment in the next two weeks.

Each month, the Office for National Statistics (ONS) conducts the Labour Force Survey, and unemployment statistics for the current month and previous two months, based upon the results of the survey, are published. Simultaneously, the ONS produces monthly statistics of the numbers of people claiming Jobseeker’s Allowance using data provided by the Department of Work and Pensions (DWP). The claimant statistics should not be interpreted as a reliable indicator of unemployment figures since not every person that meets the definition of ‘unemployed’ claims Jobseeker’s Allowance.

Public sector versus private sector employment performance

One of the consequences of the UK’s current financial climate has been the widespread reduction of employees in the public sector as part of Government ‘austerity’ measures. If unemployment has fallen despite this it is possible to conclude that there has been an increase in job creation in the private sector. This conclusion appears to be supported by the ongoing prosperity of UK areas rich in private businesses, such as the Gatwick Diamond: a region of Sussex with Gatwick Airport at its centre which is home to many larger private companies operating in advanced manufacturing, environmental technologies, aviation, financial and professional services as well as a number of small, innovative businesses. The Gross Domestic Product (GDP) of the Gatwick Diamond businesses alone is estimated at around £13 billion, with around 80% of the working age population in employment.

Can unemployment statistics actually provide a real outlook?

Statistics, by their nature, are open to interpretation in different ways by different people. Attempting to interpret UK unemployment statistics to obtain a ‘real’ outlook is a risky undertaking, since many variables such as changes in government policy, fluctuations in the value of Sterling against other currencies and the awarding of large-scale business contracts can affect results quickly and unpredictably. Current statistics have left economists and financial analysts divided as to the outlook for UK unemployment: some believe that the most recent fall is attributable to an increase in people taking part-time jobs because fewer full time jobs are available whilst others view it as the first small sign of a recovering economy.

Until UK unemployment statistics demonstrate a trend or pattern that can only be interpreted in one way – sustained improvement or decline – obtaining the real outlook remains sketchy at best.

This article was contributed on behalf of Gatwick Diamond Jobs.

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