Unemployment figures signal double dip recession?

Financial News

The latest set of unemployment figures were certainly confusing, on the face of it a drop of approximately 3,000 is to be welcomed, but if you delve further into the figures the news is not so great.

Total unemployment stands at 2.46% with the number of people who have been out of work for more than a year rising by 37,000 to 663,000, the highest figure since 1997. Furthermore the number of people claiming Job Seekers Allowance rose by 23,500 to 1.64 million in January, this rise was certainly unexpected by economic experts who believed we would see a fall in the numbers claiming benefit.

Confused? With all the different measures it’s not hard to see why. So what do the seemingly contradictory figures mean?

It would seem that the fall of 3,000, which has offset the rise of 37,000 claiming Job Seekers Allowance, is mainly due to a rise in the number of people prepared to work part time or take up temporary employment. The number of workers in temporary jobs has risen to 1.434 million, up from 1.427 million in the previous three months. Furthermore 34.6% of those working on a temporary basis have said they have failed to find permanent work, indicating that workers are finding it harder to find full time, permanent, employment.

Interestingly the patterns of employment for male workers seem to be changing significantly with the number of men forced to take temporary work up by 9.2% from the previous quarter.

Most experts agree that the unemployment figures are not as bad as they anticipated and that less jobs will be lost in the recession than had been expected. This is partly due to the additional number of part time workers but also because employees have been prepared to take pay cuts to stay in work.

However the number of people who are long-term unemployed has gone up indicating the job market may be hardening with full time, permanent employment, becoming harder and harder to find.

So, what do the figures mean for the future?

Whilst this is the second consecutive month that the wider measure of unemployment has fallen the rise in the claimant count could point to further increases ahead. The economy is still very weak, with more job losses expected in the private sector during 2010. Cut backs to come in the public sector after the election also need to be factored in as whichever party wins tries to cut the record budget deficit.

All these factors indicated that things could get worse before they get better. The Institute of Directors (IoD) certainly believes this could be the case, “Today’s numbers support the IoD’s view that the economy may experience a double-dip to the recession in the first half of 2010,” said Graeme Leach, chief economist at the Institute of Directors
“Weak employment and unemployment statistics are compounded by falling real earnings with inflation well ahead of pay growth. Throw in a public sector recession in 2011 and we may even end up with a triple tumble recession.”

Only time will tell how both employees and those looking for employment will fare in 2010, however one thing is for certain, a stronger employment market is needed if we are to increase the pace at which we climb out of this recession.