Incomplete labour market statistics could be hiding a nasty shock

Commenting on the Office for National Statistics’ November labour market data, Professor Len Shackleton, Labour Market Expert at free market think tank the Institute of Economic Affairs, said:

“The increase in real earnings – as wage growth outstrips inflation – is unlikely to have workers cheering too loudly. This reflects a relatively small clawback in the significant losses in real pay over recent years.

“The deeper issue, however, is that the Labour Force Survey is no longer fit for purpose. It is also unlikely that plans to relaunch the survey next year, including offering respondents a £20 voucher, will properly address the low response rate.

“For now, the ONS is relying on administrative data, such as HMRC payroll information and claimant count figures, plus ‘modelling’ of regular LFS variables projected from the April-June figures. This provides reasonable estimates of employment and unemployment. However, it does not adequately cover the hard-pressed self-employed, administrative numbers not being available monthly. Nor does it say much useful about working-age inactivity, which just emerges as a residual without proper explanation of causes for withdrawing from the workforce.

“It is mildly encouraging that employment does not seem to have fallen significantly, nor has unemployment risen in today’s figures. But as the months go by, reliance on incomplete data and experimental modelling raises the possibility of a nasty shock at some later stage when the real position becomes clearer.”


Notes to Editors

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The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.

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