Unemployment falls but significant job risk remains

The latest release of employment data (mainly taken from the Labour Force Survey (LFS)) shows an improvement in the labour market but significant risks to employment still remain with government spending cuts and global economic and financial uncertainty.

The unemployment figures

Latest figures from the Office for National Statistics (ONS) show that unemployment declined by 34,000 in the previous quarter (three months to May 2010).

The number of people now unemployed in the UK stands at 2.47 million.

The proportion of people now unemployed as a percentage of the working age population has now fallen to 7.8 per cent, which is the lowest rate reported for a year.

On the flip side of the coin, there was a large rise in the number of people in employment. Those now in work rose by 160,000 which represents the largest single increase since the Summer quarter of 2006.

Part-time workers

Although the rise in employment in the last three months is encouraging for signs of economic recovery, the figures also show a 148,000 rise in the number of people in part-time employment, which is naturally less positive than such a large rise in full-time workers.

In fact, taking those 148,000 people away from the overall rise in employment of 160,000 means that the rise in full-time employment was just 12,000, not a particularly strong figure.

The report issued by the Office for National Statistics showed that 27 per cent of all workers in the UK economy are now part-time, which is the highest proportion since the this data series began in 1992.

Other research suggests that a large proportion of those part-time workers are unable to find full-time work or have had their hours scaled back by their employer, which are clear indications of just how tight the labour market currently is still.

Future employment

Although it has to be said that the latest employed data released by the ONS is positive there are significant risks to employment going forward. A large number of economic forecasting bodies suggest that unemployment could actually start to rise once more by the end of 2011.

With the planned budget cuts the governments own figures suggest a large rise in unemployment in both the public and private sectors. Many economists, including economists at the Chartered Institute of Personnel & Development (CIPD), argue that the private sector is too weak to soak up job losses in the public sector.

Given the level of job uncertainty it still makes good sense to consider options in the private insurance market, such as unemployment income protection and payment protection cover.