The general rule of thumb that all economic data should be treated with caution applies in spades to the latest jobs figures released by the Office for National Statistics.
After admitting its old method for taking the temperature of the labour market was no longer fit for purpose, the ONS has published “experimental” assessments for employment, unemployment and inactivity based on a range of sources.
What this means in practice is that the traditional labour force survey – interviews with members of the public to find out whether or not they were working – has been supplemented by payroll data from HMRC and the claimant count.
This is not the first time the ONS has been in the news recently over how it draws up its figures. Last month it made significant upward revisions to the UK’s growth rate during the Covid-19 pandemic and its aftermath. Questions are now being raised about the accuracy of the new jobs figures.
Tony Wilson, the director of the Institute for Employment Studies, said: “These data sources have themselves had their issues over the years, so it is not a good sign that they are now considered more reliable than the official survey.”
Other labour market experts made similar points. Allan Monks, a UK economist at JP Morgan, said: “These alternative data sources are not necessarily comparable with each other, and the claimant counts themselves have not been in focus for several years due to issues related to changes in the benefit system.”
Given that the experimental data is not entirely consistent with the figures released using the labour force survey alone, it makes it harder to form a clear picture of what is happening.
As far as the Bank of England is concerned, the change in methodology could not have come at a worse time, given it has to make up its mind what to do with interest rates next week. That decision is now trickier than it might otherwise be, and means the Bank’s nine-strong monetary policy committee may pay less heed to the official jobs data than previously.
The financial markets think the Bank will again leave rates on hold next week and, to the extent that it is possible to draw any conclusions from Tuesday’s figures, the impression is of a labour market that is growing weaker, albeit at a relatively modest pace. Employment fell by 82,000 in the three months to August, a slightly slower pace of decline than in the three months to July.
The unemployment rate remained unchanged month on month at 4.2% but only because there was a rise of 130,000 in inactivity – people who have ceased looking for work – in the three months to August.
While the latest ONS labour market data may well be revised, it is in line with other recent news suggesting the economy is – at best – flatlining. After the 14 increases in interest rates that have taken official borrowing costs from 0.1% to 5.25%, some softening of demand for workers was only to have been expected. The only real surprise has been that the labour market has been as strong as it has for as long as it has.
