According to official data, the United Kingdom’s unemployment rate has increased to 4.2%.

The latest “experimental” official data from the UK shows that unemployment has increased. The data indicates a 0.2% rise in the three months leading up to the end of August, resulting in a 4.2% unemployment rate when compared to the previous quarter.

According to the Office for National Statistics (ONS), the employment rate decreased to 75.7%, representing a decline of 82,000 individuals or 0.3 percentage points during the same time frame.

The latest indication of a slowdown in the UK job market is the decrease in job openings to below 1 million, specifically 988,000. This marks a decrease of 43,000 and continues a trend of declining job vacancies for the 15th quarter in a row.

The ONS issued a warning that these numbers should be viewed as “experimental statistics”. They made an uncommon decision to postpone their monthly report using the labour force survey (LFS), which was supposed to be released last Tuesday, due to a low response rate.

Instead, it generated a different set of employment and unemployment data for the UK using growth rates calculated from real-time information on pay as you earn, provided by HMRC, and the number of claimants for the months of May to July 2023 and beyond.

The statement mentioned the need for a comprehensive understanding of the labor market due to the uncertain nature of LFS estimates.

Economists expressed concerns over the alteration in methodology, cautioning that it may impact the Bank of England’s decision on interest rates on November 2nd. Tony Wilson, the director of the Institute for Employment Studies, stated that the reliability of these data sources has been questioned in the past, making it concerning that they are now being deemed more trustworthy than the official survey.

Hannah Slaughter, from the Resolution Foundation thinktank, expressed concern that the inadequate data could impede important decisions, such as the Bank of England’s interest rate policies and the government’s approach to labor market inactivity.

In August, the estimates revealed a rise in the number of individuals of working age who were not participating in the labor force. According to the Office for National Statistics (ONS), there were 130,000 more people who were not employed in August, resulting in a 0.1 percentage point increase in the inactivity rate for the quarter, reaching 20.9% compared to the previous three months.

According to Liz Kendall, the current statistics indicate that the employment rate has not yet returned to pre-pandemic levels. Additionally, there is still a significant number of individuals who are unable to work due to long-term illness, which is at an all-time high.

Executives in the business world expressed concern over the rise in inactivity during August. According to Jane Gratton, a deputy director at the British Chambers of Commerce, the trend of increased economic inactivity is disappointing and goes against recent patterns. Gratton believes that employers require a significant influx of individuals actively seeking employment in order to maintain a stable workforce.

The secretary of work and pensions, Mel Stride, stated that there has been a decrease in inactivity of over 250,000 since the peak of the pandemic.

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Economist Ashley Webb from consultancy firm Capital Economics stated that the latest data indicates a decline in the job market, although it was not as significant as anticipated. The decrease of 82,000 jobs in August was an improvement from the 133,000 decrease in July.

Economists have criticized the ONS for a significant decline in responses to the labor force survey, dropping from around 90,000 to under 50,000. This has raised concerns about the reliability of UK statistics. The ONS has committed to improving the survey by next spring.

According to Wilson, the ONS’s efforts to improve the situation by using figures from the claimant count and HMRC PAYE data are unlikely to be a trustworthy measure of the UK’s employment status. The head of IES expressed disappointment with the delayed release of today’s labor market statistics and stated that it was not worth the wait.

The individual expressed optimism that things would go back to normal in the near future, but acknowledged that it may not be until next spring’s revised labor force survey before there is a clearer understanding of the current situation.


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