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Blog posted by: Jacob Mohun (November 14, 2013)

On the surface all appears well. UK unemployment, and even youth and long-term unemployment, have fallen, according to latest labour market stats from the ONS.

Compared to last quarter:

• Employment increased by 177,000 (and full-time work accounted for around 90% of that increase),
• Unemployment is down by 48,000 to 7.6%,
• Youth unemployment is down by 9,000 – a modest fall but welcome,
• And long-term unemployment (unemployed for two years or more) is down by 15,000.

But on closer inspection the labour market looks much less healthy. The narrow measure of underemployment - those part-time workers who want a full-time job - has risen. And again wage growth falls short of inflation meaning a real terms decline in earnings.

This squeeze on both hours and earnings is eroding the value of having a job. This ought to make us wary of only looking at the unemployment figures as a measure of the economy and the recovery.

Comparing again to last quarter:

• Regular pay growth was 0.8% short of the current inflation rate of 2.2% (although the fall from 2.7% since last month and will ease the squeeze on living standards slightly),
• Those who work part-time because they couldn’t find a full-time job has risen by  24,000 to 1.46m people,
• Those who work temporary jobs because they couldn’t find a permanent employment has risen by 10,000 to 706,000 people.

There are worryingly high and rising levels of underemployment in the labour market. As well as the squeeze people are feeling on their wages, the longest seen in UK since the 1870s (see data here), people are being squeezed on hours too. Many workers have only been kept from joining the 2.47m currently unemployed due to this squeeze on their abilities – they are unable to reach their full potential and get the sort of positions or hours of work they would like. 

The recession has meant that taking any job available, even those with lower pay and fewer hours, has been the only possibility for many. When a broader measure of underemployment is applied - including anyone who is employed but wishes to work more hours in either their current role or is looking for an additional job or a replacement job which offers more hours – the situation looks much worse.

A total of 3.08m people are reported to be in this position, rising by over a million people since 2008. The fact that the number of underemployed people continues to grow shows just how weak our recovery is, and how fragile the labour market remains.

Being underemployed carries a huge pay penalty that puts a real strain on people's finances. It can also cause significant longer-term career damage; particularly worrying for the 1 in 5 young people aged between 16 and 24 currently underemployed.

For full-time work to be available for those who want it, proper investment is needed in order to create high quality jobs. Creating good and sustainable jobs is the only way to build a sustainable economic recovery, and despite the political rhetoric, the continual rise in underemployment suggests that we’re not there yet.