Unemployment falls slightly but UK business yet to be convinced

UK business groups are still wary of an unstable job market, even though the latest employment figures published today show a marginal fall in unemployment levels.

The Office for National Statistics (ONS) said that the unemployment rate for the three months to March 2011 was 7.7%, down 0.1 percentage point on the previous quarter, with the total number of unemployed people falling by 36,000 over the three-month period to reach 2.4 million.

However, despite the amount of people out of work for up to 12 months falling by 56,000, the number of people unemployed for more than 12 months increased by 20,000 to reach 850,000, the highest figure since the three months to January 1997.

Further, the number of people claiming jobseeker’s allowance increased by 12,400 between March and April 2011 to reach 1.47 million, with the number of female claimants increasing by 9,300 to reach 474,400, the highest figure since October 1996.

Business groups gave an extremely cautious welcome to the figures but flagged up areas of concern.

Ian Brinkley, director of socio-economic programmes at The Work Foundation, said: “The strong growth in full-time jobs is especially encouraging, as this is one of the key indicators of a sustainable recovery.”

But he added: “Young people in particular are still facing tough conditions. There is little sign of a significant recovery in employment for those under 25. Employers looking to hire may be going for experience over youth.”

Nigel Meager, director of the Institute for Employment Studies, argued that public sector cuts could cause a rise in unemployment.

“The employment bath is filling slowly, with only a trickle of new jobs, as the economy stutters back into growth,” he commented. “The worse news is that big public sector job cuts will shortly pull out the bath plug, and overall employment levels may well fall again.”

The Chartered Institute of Personnel and Development’s chief economic adviser, Dr John Philpott, commented that the figures present “something of a conundrum” for economists. Philpott explained: “We’re familiar with the phenomenon of jobless growth but the UK economy is at present creating jobs without growth.

“The ongoing real pay squeeze is thus helping an anaemic economy support employment as well as offsetting fears of an inflationary pay-price spiral. If this continues, the pain of economic austerity is likely to be observed as a widespread fall in living standards rather than a further sharp rise in unemployment.”

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