Understanding unemployment statistics

Looking back over some of my previous posts, it occurs to me that I have never fully explained unemployment statistics or how to interpret them.

In the United Kingdom there are two statistics which are published regularly, although they are not always widely reported in the media.  One is the claimant count, and the other is the Labour Market Survey.

The claimant count records the total number of people in the whole country who are claiming benefits on the grounds that they are looking for work.  It is compiled on a monthly basis, and is - or at least ought to be - a precise, reliable figure.  The reason why it is not necessarily a reliable figure is because it is easy for the government to find ways to remove people from the claimant count - for example by persuading them to claim other benefits.

The Labour Market Survey is compiled quarterly, and is an estimate of the number of people out of work in the whole country.  It is based on a survey of a randomly chosen group of people, and is therefore unlikely ever to be a precise figure.  On the other hand there is no reason to regard it as an unreliable figure.  So far as I am aware, no government has ever tried to manipulate it unfairly.

The way to interpret these statistics is as follows.  Take the current level of unemployment as estimated by the Labour Market Survey; then take the fall in the level of unemployment since the last quarter.  At the time of writing, these figures are 1.62million and sixteen thousand respectively.  Then simply divide the one figure by the other, which for the current quarter yields a figure of 101.25.

What this figure reveals is that if unemployment continues to fall at the present rate, then we will achieve zero unemployment in 101 quarters from now.  Divide 101 by four, and we see that full employment can be achieved in twenty-five years from now if unemployment continues to fall at the current rate.

The claimant count can be interpreted in much the same way.  Divide the claimant count by the extent to which it fell since the previous month, and then divide that number by twelve to convert months into years.

If the government is serious about tackling unemployment, then it should achieve falls in both the level of unemployment and the claimant count which are consistent with both figures falling to zero in only a few years.

The British economy does not function in a vacuum.  It is influenced to a large extent by economic events in other parts of the world, although British politicians are generally unwilling to admit this.  As a result, we must expect that - no matter how skilfully the British government manages the economy - we will experience rising unemployment from time to time.

The challenge for any government is to ensure that when unemployment does rise that it rises from a position of not one person out of work - and that has never happened in my lifetime, nor even come close to happening.

Related previous posts include:
Unemployment falls again
The new power house in Europe