Unemployment rate highest since 1996

New figures from the Office for National Statistics show that UK unemployment in the UK is now at its highest since 1996 and the number of unemployed people is the highest since 1994.

The overall unemployment rate in the third quarter was 8.3% of the economically active population, up 0.4 on the quarter. There were 2.62 million unemployed people, up 129,000 on the quarter. 

The jobless total for 16 to 24-year-olds hit a record high of 1.02 million in the quarter. The unemployment rate among 16 to 24-year-olds is now 21.9%, also a record.

Total pay (including bonuses) rose by 2.3% on a year earlier, down 0.4 on the three months to August 2011 (with both the private and public sectors showing lower pay growth). Regular pay (excluding bonuses) rose by 1.7% on a year earlier, down 0.1 on the three months to August.

 Dr John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development (CIPD) commented: “The UK is now clearly suffering a major jobs and pay crunch under the combined impact of tough fiscal policy medicine and very uncertain conditions in the global economy. The private sector is simply unable, at present to create enough jobs to offset public sector job cuts. At 2.6m in the three months to September, unemployment is already higher than consensus forecasts had expected for 2011 as a whole. With nothing to suggest a pick-up in the economy any time soon, unemployment is at best likely to peak at around 2.75 million next year.  Were the economy to experience a double-dip recession unemployment could reach 3 million by 2014.

“While the rise in headline youth unemployment to 1.02 million is set to grab most attention the most worrying feature of these latest jobs figures is a quarterly fall of 305,000 in the number of employees (spilt roughly half and half between full-timers and part-timers), including almost 100,000 temps. Without a corresponding 100,000 increase in self-employment the overall jobs situation would thus look worse still.

“Also very worrying is the rise to 868,000 in the number of people unemployed and looking for work for more than a year, 30% of whom are aged 16-24. It is these long-term unemployed young people, rather than unemployed youths as a whole, who should be the prime target of Government policy measures.

“With growth in earnings also easing against a backdrop of still high price inflation, the jobs and pay crunch is clearly making this a miserable time for UK workers as well as the jobless, the anaemic ‘jobs-light/pay-tight’ recovery itself feeling just like a recession.”     

Nigel Meager, Director of the Institute for Employment Studies, said: “While it may be tempting to blame the latest poor labour market figures on the Eurozone crisis, there is no evidence whatsoever for such a conclusion. The labour market has been in the doldrums since well before the problems in the Eurozone kicked off. Unemployment, having grown dramatically in the first year of the recession to Spring 2009, has remained stuck in the 2.5-2.6 million range for the last two and a half years. Similarly job vacancies, having fallen rapidly in the first year of the recession, have remained flat at around 450,000 for the last two and a half years.

“What is true, however, is that the Eurozone problems are likely to reduce the chances of an early labour market recovery. The risk is that their impact on business confidence will further reduce demand from private sector employers, at the same time as the public sector jobs cuts really begin to bite.”

He added: “Looking ahead, the picture remains unclear. There has been a spate of recent reports showing limited hiring plans in the private sector, and the underlying level of demand in the labour market remains very subdued, with nearly six unemployed to every vacancy. Having said that, the picture of labour demand emerging from these latest figures remains flat, rather than showing any great deterioration, with vacancies slightly up, redundancies slightly down, and a small increase in the total number of hours being worked.”