Unemployment lower than expected in new ‘experimental’ figures – but experts raise concern over data quality
The level of unemployment is slightly lower than official estimates had originally assumed, but experts have raised questions about the accuracy of the data.
According to figures from the Office for National Statistics (ONS), the rate of unemployment between June and August was 4.2 per cent, unchanged from revised figures for last month and slightly lower than economists had expected.
Although the level of unemployment was up 0.2 percentage points on the previous quarter, it was lower than the ONS’s previous estimate for July’s of 4.3 per cent.
The ONS said that the new data was “experimental”, reflecting the declining response rate to its previous Labour Force Survey estimates. Unemployment figures were not published last week alongside the wider labour market survey due to falling responses.
ONS director of economic statistics Darren Morgan said: “Today we have produced a new metric, produced by adjusting our headline survey estimates using robust administrative data sources that we receive from other government departments. This maintains the accuracy of our key statistics.”
But experts were concerned that the “experimental” data might not be painting the most accurate picture of the UK’s labour market.
Hannah Slaughter, chief economist at the Resolution Foundation said the state of the data was “worrying” as it makes it “harder to assess the true health of the labour market”.
“We still don’t know whether employment has failed to grown since the pandemic, or risen by one million,” she said.
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics said the experimental estimates “raise questions about the reliability of the data”.
A lack of reliable data will make life difficult for the Bank of England when it meets next week for its latest interest rate decision.
However, both Slaughter and Dickens clarified that the figures did indicate that the labour market was loosening and despite the downward revision, the official level of unemployment remains above the Bank’s August forecast.
“We see enough corroborating evidence to think the official labour market statistics are correctly signalling greater slack,” Dickens said.
The rise in unemployment comes after an aggressive rate-tightening campaign from the Bank of England, which has seen interest rates brought to a post-financial crisis high of 5.25 per cent. Increasing slack in the labour market helps to slow wage growth, as the supply of labour increases.
Figures out last week showed that average wage growth had slowed slightly, with total annual wage growth falling to 8.1 per cent compared to 8.5 per cent in the previous reading.