Unemployment lower than previously thought according to ONS following revamp of data collection
New figures from the Office for National Statistics (ONS) suggest that the unemployment rate has been falling over the past few months, a sign of the continued tightness of the UK’s labour market.
The ONS put out new estimates this morning for the levels of employment, unemployment and economic inactivity.
This morning’s figures are not part of the ONS’s revamped survey but should be more accurate than figures published in the second half of last year, which did not reflect the latest estimates of the UK’s population.
The figures cover the period from July-September 2022 until the end of November and suggest that the UK’s unemployment rate at the end of the period was 3.9 per cent.
Previous “experimental” estimates, which used up-to-date administrative data, put the unemployment rate in the three months to November at 4.2 per cent.
The ONS said the decrease in unemployment was “offset by an increase in the rate of economic inactivity,” helping to keep the overall employment rate broadly flat.
The inactivity rate was revised up from 21.9 per cent in the three months to November, up from 20.8 per cent. However, the ONS cautioned “some uncertainty remains in these estimates.”
Policymakers are keeping a close eye on developments in the labour market for indications of how the Bank of England’s interest rate hikes are impacting the economy.
Coming just a week after the Bank opened the door to interest rate cuts later this year, analysts argued that the data would likely lead the Bank to hold on longer before cutting interest rates.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the “downward revision to unemployment rate increases pressure on the MPC to wait.”
James Moberly, analyst at Goldman Sachs agreed: “The reduction in the unemployment rate suggests that progress on labour market rebalancing may have stalled, which has somewhat hawkish implications for the Bank.”
The ONS has been forced to improve the accuracy of its flagship Labour Force Survey after falling response rates raised questions about the accuracy of the data.
Since October the ONS has been publishing “experimental” estimates based on real time indicators rather than detailed survey work, which was interrupted by the pandemic. The updated LFS will become the primary source of information on the labour market from September 2024.