Unit 2 Macro: Measuring Unemployment in the UK

The unemployed are people able, available and willing to work at the going wage rate but cannot find a job despite an active search for work.

Unemployment means that scarce human resources are not being used to produce goods and services to meet people’s needs and wants. Persistently high levels of joblessness have damaging consequences for an economy causing both economic and social costs.

Measuring unemployment

Claimant Count
The Claimant Count measure includes people who are eligible to claim the Job Seeker’s Allowance (JSA). The data is seasonally adjusted to take into account predictable seasonal changes in the demand for labour.

The chart below shows the level of unemployment as measured by the claimant count - note the y-axis, the number of people claiming the jobseekers’ allowance

Data from Timetric.

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Bank of England Target 2.0 from Timetric

Labour force Survey
The Labour Force Survey counts those who are without any kind of job including part time work but who have looked for work in the past month and are able to start work immediately. The figure includes those people who have found a job and are waiting to start in the next two weeks

The chart below shows the LFS unemployment rate is unemployment as a percentage of the labour force

Data from Timetric.

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Bank of England Target 2.0 from Timetric

On average, the labour force survey measure has exceeded the claimant count by about 500,000 in recent years. Because it is a survey - albeit a large one and one that provides a rich source of data on the employment status of thousands of households across the UK - there will always be a sampling error in the data. The Labour Force Survey uses the internationally agreed definition of unemployment and therefore best allows cross-country comparisons of unemployment levels among developed countries.

No measure of unemployment can ever be completely accurate since there are some people out of work but looking for a job who are not picked up by the official statistics. An example of this are discouraged workers who may have been out of employment for a lengthy time and who have lost the motivation to keep applying for jobs. Many may decide to leave the formal labour market and look to earn extra income through ‘cash in hand’ jobs in informal parts of the economy.

Economic inactivity

Economically inactive people are not actively looking for work – some of the reasons include

• The need to look after elderly or infirmed relatives
• Parents who are full-time carers for their children
• The retired

Data from Timetric.

To view this graph, please install Adobe Flash Player.

Bank of England Target 2.0 from Timetric

Note that in many countries the official data may ignore the extent of under-employment in an economy, for example people who are desperate for full-time work but who cannot find it and have to settle for a part-time job. In many lower-income countries the quality of the labour market data may be poor causing published figures to be inaccurate