Little trust in jobless figures

ECONOMICS - THE WEEK IN VIEW

Politicians out campaigning will find unemployment rather than inflation is the key economic issue for voters. Recent reports have pointed to a steep decline in the jobless numbers, but the electorate remains sceptical of Government achievements.

The Conservatives can claim some success in reducing the number of unemployed over the lifetime of this Parliament. Unemployment fell 68,200 in February, the sixth month of steep declines, last week's report from the Office for National Statistics showed. The number of people out of work and claiming benefits is now down to 1.746 million, leaving the jobless rate at 6.2 per cent. This compares with 2.7 million unemployed in April 1992.

But if John Major is campaigning on the record since 1979, the picture is less rosy. Unemployment is still half a million higher than it was in May 1979, when Mrs Thatcher took power.

The other problem for the Government is that no one believes the recent economic statistics. The official figures have been distorted by the introduction of the Jobseekers' Allowance last autumn, driving claimants off the register. The ONS is not able to quantify by how much the figures are affected.

"There is no doubt that there are some very good reasons to be sceptical of the labour market figures," said David Bloom, economist at HSBC James Capel.

Reports from the International Labour Organisation show the jobless rate in autumn 1996 was 7.9 per cent, a decline of 0.6 per cent from a year earlier - a much slower rate of decline than official figures suggest.

"There is still a substantial stock of unemployed and not enough people in work," said Neil Blake, research director at Business Strategies. "Unemployment is likely to continue falling for another year or so as growth continues."

The strength of sterling, however, is now hurting manufacturers which will curb growth in jobs. News of accelerated job losses in the next financial year at British Steel last Thursday confirmed recent anecdotal evidence from the CBI on the impact of the pound's rise.

A closer analysis of recent employment statistics suggests other reasons why the electorate remains worried. The structure of employment has changed in the last 10 years, with most of the jobs growth in part-time work, while the number in full-time employment has remained relatively static.

The Labour Force Survey also published last week by the ONS shows that the number of full-time workers in spring 1996 was 19.3 million, up from 18.6 million in spring 1984. Over the same period the number of people in part-time work has risen to 6.4 million from 4.8 million. The number of men in part-time work has more than doubled to 1.2 million from 562,000 while the number of women has risen to 5.2 million from 4.3 million.

Labour has made unemployment one of its main issues in the election. It has pledged it will introduce a windfall tax on the profits of privatised utilities to start taking 250,000 young and long-term unemployed into work. Employers will be offered tax breaks of pounds 60 a week to take on a jobless worker or pounds 75 for someone who has been out of work for more than a year.

This may be a vote winner but it is questionable how effective it will prove.

"It isn't very different from schemes that have been used before... It will depend on how much money is available to fund it," said Mr Blake.

The Labour party says that a windfall tax yielding pounds 3bn would be sufficient to cover the scheme. Copyright: IOS & Bloomberg