Unemployment down but what’s really happening in job market?

shutterstock_131096951-1-2The unemployment rate in London fell slightly in the last quarter but the city still has the second highest rate of joblessness in the UK at 5.9%. Behind this headline rate is a more complex picture of the jobs market in the capital.

The unemployment rate for the whole of the UK for January to March this year was 5%, the lowest level since 2005, according to the latest data from the Office for National Statistics.  At 5.9% London has the second highest rate along with Yorkshire and Humberside and only the North East of England has a higher rate – 7.3%.

This means 280,000 people in London are without work.  But only 85,000, of them are claiming Jobseeker’s Allowance, the benefit for the unemployed.

Despite having one of the highest unemployment rates, the benefit claimant rate is among the lowest in the country.  Only the South East and the East of England have lower proportions of benefit claimants and these regions also have the lowest unemployment rates.

Yorkshire and Humberside has the same unemployment rate as London but 2.8% claiming benefits compared to 1.8% in the capital.

Uemployment and claimants

There are a number of reasons for the difference between unemployment and benefit claimants. Many of them will be common for the country, some of them may be more peculiar to London.

The most obvious difference between the two rates is who is included. The unemployment figures include all those able to work between the ages of 16 and 64 but those under 18 are, in most circumstances, excluded from claiming Jobseeker’s Allowance. In London this accounts for 9,000 people in the unemployed numbers.

Part time work is also a factor.  People working more than 16 hours per week cannot claim Jobseeker’s Allowance.  This may exclude people working in unpredictable and short term, part time jobs who may be unemployed for periods but not eligible for Jobseeker’s Allowance. People on zero-hours contracts may also be impacted by this.

The residence qualification may also be a factor, particularly in London.  To claim Jobseeker’s Allowance a person must be resident in the UK for at least 3 months. London has a high number of young workers from the EU, particularly southern Europe.  They would not be eligible to claim benefits when they first arrive to start seeking work.

The other key factor is the natural churn of the workforce.  The unemployment figures include people who have found work but not yet started. A number who are between jobs will not go through the process of making a claim for benefits.

London is the leading place in the UK for job creation. Since December 55,000 new jobs have been created. Over the same period the number of people who are economically active and available for work has risen by 50,000.

The Bank of England and the Office for Budget Responsibility have a target rate of 5% for sustainable unemployment – the rate at which people who want a job have one and any lower rate may mean wage inflation.

London may be approaching ‘peak job’ but what may matter more to employers and employees are the quality of the jobs, the wages and the productivity.

Source data

See also

Jobs growth brings decade-high employment rate for young people

Success of creative industries is good news for jobs growth in the capital

Over 750,000 jobs pay less than the living wage in the capital