UNEMPLOYMENT – UNDERSTANDING THE DATA
A Variety of Unemployment Measures
In its simplest form, unemployment is a measure of how many people are out
of work in the economy. However, you may read an unemployment figure in
the newspaper that differs from one you hear on the radio, and differs again
from one you see in an unemployment bulletin. The reason is because there
are different measures of unemployment each with their own advantages and
disadvantages. The typical unemployment measures and variations on those
measures are summarised below.
Labour Force Survey
The labour force survey is a national survey conducted by the Office for
National Statistics which has been designed to capture data about the labour
market on a quarterly basis. All EU members are required to conduct a labour
force survey, making it possible to compare the UK with other countries.
Currently (2011), there are typically 120,000 individuals surveyed per quarter
across the UK. However, this has also been boosted by incorporating results
from the annual population survey, which is a shorter survey, but contains
many of the core questions. Typically 340,000 individuals are surveyed per
quarter. The labour force survey and the annual population survey capture the
International Labour Organisation (ILO) definition of unemployment, which is
when people are without a job, are available to start work in the next fortnight
and have actively sought work within the past four weeks or have found a job
and are waiting to start.
Advantages:
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As all EU members are required to conduct a labour force survey,
comparisons can be made with other countries.
The large sample size (120,000 LFS + 340,000 APS booster
sample) means that confidence intervals for the data at national and
regional level are small. At regional level and above, it is therefore
relatively easy to identify significant changes in unemployment.
Unlike the Jobseekers Allowance measure below, this
unemployment measure includes both JSA and non-JSA claimants,
providing a more accurate picture of those people out of work.
To calculate the unemployment rate, those aged 16 and over who
stated in the survey they were economically active are used as the
denominator. This is advantageous because it excludes those who
are unable to work, perhaps because of physical ability or
circumstances.
Unemployment by age and gender is available.
Disadvantages:
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Despite the booster sample from the annual population survey,
below regional level, confidence intervals are large. For example, in
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Gateshead for the year ending March 2011, the working age
unemployment rate was 10.4%, however, the confidence interval
means that the true figure could fall anywhere between 8.2% and
12.6%. Examining unemployment for smaller groups such as youth
unemployment widens the confidence interval to around 17%.
Large confidence intervals below regional level mean tracking
unemployment for significant changes is not possible.
The release date for data below regional level is at least 6 months
behind that available for region and above.
Data below regional level is not directly comparable with that
available for region and above because it is a four quarter average
as opposed to just the latest quarter.
Jobseekers Allowance Claimants
A record of the number of claimants of Jobseekers Allowance (JSA) is
captured nationally by the Department for Work and Pensions via Jobcentre
Plus local offices. This is not an official measure of unemployment because it
does not include those out of work who are not claiming Jobseekers
Allowance. However, it is useful because it is an actual count of claimants,
rather than an estimation with confidence intervals, and is therefore a very
responsive measure. Though it is lacking in terms of describing the full extent
of unemployment, it does have the ability to monitor and track increases or
decreases in the number of Jobseekers Allowance claimants or the claimant
rate in a very responsive way.
Advantages:
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There is 100% confidence in the Jobseekers Allowance claimant
rate at all geographical levels because it is taken from an actual
count of claimants.
This is the only indicative unemployment measure available for
areas smaller than local authorities e.g. wards/LSOAs
The rate is very responsive to changes in unemployment and
therefore useful in monitoring the trend in Jobseekers Allowance
claimants.
Data is made available in the month immediately after claims are
made.
Jobseekers Allowance claimant data is available by age, gender,
duration, ethnicity and occupation.
Disadvantages:
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Only those claiming Jobseekers Allowance are included in the
measure. Unemployed people not claiming Jobseekers Allowance
are excluded. In Gateshead this currently (Oct 2011) relates to
around 3,500 unemployed people not claiming Jobseekers
Allowance.
To calculate the Jobseekers Allowance claimant rate, the total
number of people of working age is used as the denominator. This
could be seen as a disadvantage because it includes those who are
unable to work, perhaps because of physical ability or
circumstances. Use of a working age denominator is historic, as it
was used as the denominator when Jobseekers Allowance was
included as a national indicator. However, an estimated
economically active population denominator could be applied if
necessary.
A variation of the above Jobseekers Allowance claimant measure of
unemployment is used at ward level. A ward level unemployment measure is
reported to local elected members. This measure uses Jobseekers Allowance
claimants but with an estimated economically active denominator that has
been calculated by applying Census 2001 economic activity rates to current
working age population estimates.
Advantages/Disadvantages:
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The advantages and disadvantages mentioned above apply equally
to this variation of the Jobseekers Allowance measure, with the
exception of the denominator, which because it is an economically
active denominator may be viewed as advantageous.
What the data tells us
This section is an example analysis of the various different unemployment
measures with a view to highlighting, in practice, the advantages and
disadvantages outlined earlier in this report.
Example Analysis
Trend…
The Jobseekers Allowance claimant rate shows that there were 6,319, or
5.1% of working age people, claiming Jobseekers Allowance in October 2011.
Because of the responsive nature of this measure, and because it is an exact
count of claimants, the trend can be meaningfully examined. The trend shows
that prior to the recession in 2008, there was a low of 2.5%, or 3,080
Jobseekers Allowance claimants in Gateshead – less than half of the current
number. This increased after the 2008 recession to a high of 5.2%, 6,458
claimants, at the beginning of 2010. During 2010, the number of claimants
reduced slightly, but climbed back to post–recession levels and remained
there from early in 2011. The trend can also give an indication of the future
Jobseekers Allowance claimant rate. For example, in the first 10 months of
2011, the claimant rate increased on average by 0.1% per month. If this rate
of increase continues, Gateshead’s claimant rate will hit 6%, over 7,400
claimants, in January 2013. Of course, the future Jobseekers Allowance
claimant trend will be influenced by other factors, from local market conditions
to the global economy, and is unlikely to follow a straight line.
Extent…
The Labour Force Survey provides an indication of the true extent of
unemployment, picking up both JSA and non-JSA claimants. The latest
available data for Gateshead is from the year ending March 2011, and so is
not as responsive as the Jobseekers Allowance data above. Despite this it
shows that there were an estimated 9,800, or 10.4% of working age
economically active people, who were unemployed. Unfortunately due to large
confidence intervals the true figure could fall anywhere between 7,727 and
11,873 or 8.2% and 12.6%. It is this lack of confidence in the data which
makes it more difficult to use at a district level, nevertheless it still provides an
indication that the true level of unemployment is much higher than the
Jobseekers Allowance claimant rate indicates.
National Comparators…
National comparators are available for both of the measures above, and both
show that Gateshead has significantly higher rates than the UK. The current
Gateshead Jobseekers Allowance claimant rate of 5.1% compares with a UK
rate of 3.9%. From pre-recession to date, the gap between Gateshead and
the UK has widened having increased from 0.5% to 1.2%. The Labour Force
Survey measure of working age unemployment shows that the Gateshead
rate of 10.4% (where the true figure could fall between 8.2% and 12.6%) is
significantly higher than the UK rate of 7.7% (true figure between 7.6% and
7.8%). The confidence intervals for this measure make it difficult to accurately
compare the change in gap between Gateshead and the UK over time.
Though not directly comparable with the whole year figures for Gateshead
and the UK mentioned above, the more up to date quarterly (Jul – Sep 2011)
LFS unemployment rate for the UK is 8.4%, it is therefore expected that the
Gateshead rate will also increase when data is made available up to
September 2011.
International Comparators…
Only the Labour Force Survey can be used for international comparisons. The
survey places the United Kingdom unemployment rate (for the purposes of
this comparison it is a measure of those aged 16-74 which is 8.1%) in the
middle (14th) of the 27 European Union members, just behind Italy, with Spain
having the highest rate at 22.6%, and Austria the lowest at 3.9%.
Ward Comparators…
Below district level there is a Jobseekers Allowance (ward variation) claimant
rate. Because the ward variation of the measure uses the number of people
economically active as a denominator, rather than everybody of working age,
at 7.2% in October 2011, the Gateshead rate is higher than the usual
Jobseekers Allowance rate shown earlier in this report. Within Gateshead,
there are 8 wards above the Gateshead average. Felling had by far the
highest claimant rate at 16.1% or 512 people. Felling is followed by High Fell
13.2% and Dunston and Teams 11.4%. The lowest claimant rate is in Low
Fell at 2.7% or just 119 people.
From pre-recession to date, Birtley has seen the greatest proportional
increase in Jobseekers Allowance claimants, having increased between
October 2007 and October 2011 by 171% or 161 additional claimants. Felling
has had the largest increase in the actual number of additional claimants, with
258 more claimants in October 2011 than in October 2007.
LSOA and OA Comparators…
Jobseekers Allowance claimant data is available at both Lower Layer Super
Output Area and Output Area level. This enables the detection of very small
pockets of claimants and therefore further investigation into the causes of
unemployment in those areas. For example, the six main LSOAs within the
Chowdene ward contain 242 Jobseekers Allowance claimants in total.
However, a third (78 or 32%) of claimants actually live in just one of the six
LSOAs in the Allerdene area.
Conclusion
There is no one definitive measure of unemployment that can be successfully
applied across the board. Each measure or variation of the measure has its
own advantages and disadvantages. These are linked to the extent of
unemployment, the ability to monitor a responsive trend in unemployment,
levels of confidence in the data, and the availability of data at certain
geographical levels.
Where the Labour Force Survey is advantageous at a regional level and
above, enabling comparisons to be made internationally, the Jobseekers
Allowance claimant count is advantageous at district level and below,
enabling analysis at ward, LSOA, and OA level. Though the Labour Force
Survey has limitations because it is a survey and levels of confidence for
smaller geographies make it difficult to draw conclusions, the Jobseekers
Allowance claimant rate does not pick up the full extent of unemployment.
Such issues as those mentioned above need to be weighed carefully when
deciding which measure of unemployment is most appropriate on a case by
case basis.
For further information on the use of unemployment measures, contact
Matthew Liddle on 433 2046.