The general rule of thumb that all economic data should be treated with caution also applies to the latest employment figures published by the Office for National Statistics.
The ONS has published an “experimental” assessment of employment, unemployment and inactivity based on a range of sources, after admitting that old methods of gauging the temperature of the labor market were no longer fit for purpose. did.
What this means in practice is that the traditional Labor Force Survey (interviews with the public to find out whether they are working) has been supplemented with pay data and claimant numbers from HMRC.
This is not the first time the ONS has been in the news recently for the way it compiles its figures. Last month, it significantly revised upwards the UK’s growth rate during the coronavirus pandemic and its aftermath. Questions are currently being raised about the accuracy of the new employment statistics.
Tony Wilson, director of the Institute for Employment Research, said: “There have been problems with these data sources themselves for many years, so it’s not a good sign that they are now considered more reliable than official surveys.” Ta.
Other labor market experts made similar points. Alan Monks, UK economist at JP Morgan, said: ‘These alternative data sources are not necessarily comparable to each other, and claim numbers themselves have not received much attention in recent years due to issues related to changes to the benefit system. “I haven’t.”
Given that the experimental data doesn’t exactly match the numbers published using only the Labor Force Survey, it becomes difficult to get a clear picture of what’s going on.
As far as the Bank of England is concerned, the change in methodology could not have come at a worse time, given that it has to decide what to do with interest rates next week. The decision is now more difficult than it would otherwise be, meaning the central bank’s nine monetary policy committees may pay less attention to official employment figures than before.
Financial markets believe the central bank will keep interest rates on hold next week, giving the impression that the labor market is weakening, albeit at a relatively modest pace, if any conclusions can be drawn from Tuesday’s numbers. Employment fell by 82,000 people in the three months to August, slightly slower than in the three months to July.
Skip past newsletter promotions
Sign up for Business Today
Get ready for work – Get the business news and analysis you need every morning
Privacy Notice: Newsletters may include information about charities, online advertising, and content sponsored by external parties. Please see our Privacy Policy for more information. We use Google reCaptcha to protect our website and are subject to the Google Privacy Policy and Terms of Service.
After newsletter promotion
The unemployment rate was unchanged from the previous month at 4.2%, but that was only due to an increase of 130,000 people in the three months to August who were inactive, meaning people who had stopped looking for work.
The latest ONS labor market data is subject to revision, but is consistent with other recent news suggesting the economy is flat at best. Some softening in demand for workers was to be expected after 14 interest rate increases raised public borrowing costs from 0.1% to 5.25%. The only real surprise is that the labor market is as strong as ever.
