Time to examine Osborne's "500,000"

Chancellor's claim on job creation is highly misleading.

By David Blanchflower Published 31 August 2011 16:35

Writing on the Spectator's Coffee House blog earlier this week, the editor, Fraser Nelson, trumpeted: "George Osborne was right to boast in the Commons that Britain has the second-highest rate of net job creation in the G7." This is highly misleading.

My conclusion is that Nelson and Osborne are playing fast and loose with the truth, as the vast majority of these jobs were created before any of the coalition's economic policies took effect. Furthermore, things are likely to worsen soon, as indicated by the recent increase in both ILO unemployment and the claimant count.

Osborne did make the claim Nelson attributes to him. When parliament was recalled on 11 August, the Chancellor boasted: "Some 500,000 new private-sector jobs have been created in the past 12 months."

And Osborne repeated that claim during questions, insisting that the UK was doing better than the US. This was his answer in response to a question from Michael Meacher:

The British economy is growing and it is the assessment of the Bank of England and the Office for Budget Responsibility that it will continue to grow. The growth in the last six months has actually been stronger than in the United States, and half a million jobs have been created in the private sector in the last year.

Later, in the same debate, he repeated the claim in an answer to a question from Geoffrey Clifton-Brown:

Small businesses are, of course, the engine of job creation in our country. As I have said, 500,000 new jobs have been created in the private sector over the last year. That is the second highest rate of job creation in the G7.

Then, he repeated it yet a third time in an answer to a question by Dame Anne Begg.

It's time to examine these claims. Here is the data from the latest release from the ONS (Table 4), which reports employment in the private and public sectors:

It is clear that there has been a growth in private-sector jobs over the past year of over 500,000. The past year, however, refers to the period March 2010 to March 2011. Given the coalition didn't take office until May 2010 -- and its policies would not have taken effect until much longer after that date -- it is entirely disingenuous for the Chancellor to claim credit.

Let's be generous and take the data from June 2010. Here, the number is reduced from 520,000 to 208,000. That wipes out most of the claimed success.

Of course, it takes quite some time for the coalition's policies to feed into measured job creation; being charitable, we could measure the growth from December 2010, which means that only 100,000 private-sector jobs were created. Even less to boast about.

This raises another issue -- we are now in August, not March, so this data is way out of date. Why is that? The data come from the Labour Force Survey, which is a sample of individuals that is collected monthly. (Identical surveys are used in every EU country.) The trouble is, the sample size for the UK survey is so small -- due to underfunding and simple incompetence -- that the ONS feels unable to report monthly.

Instead, it generally pools three months of data together. The result? We find ourselves in the crazy position of comparing unemployment in April to June with unemployment in January to March. This makes analysis of underlying trends difficult, because, each month, a new month is added and another is dropped. This makes the moving average move -- but slowly. Plus, it makes little sense to report private- and public-sector jobs every three months, when it should be reported monthly.

The ONS needs to publish labour market data every month in a timely fashion, just as every other major advanced country does, and if it has to put more resources into it and move to bigger samples, so be it.

Today's data release by Eurostat of unemployment data for July for the EU27 countries plus Norway, the US and Japan illustrates the point. Of the 30 countries, data is available for July for 22 of them. Data up to June is available for a further five -- Denmark, Estonia, Lithuania, Norway and Japan. The UK joins Greece and Latvia as the only countries whose latest unemployment data is from May or earlier. How dumb is that?

Data lag or no data lag, Nelson is wrong: Osborne really doesn't have much to boast about on the job-creation front. He is trying to take the credit for jobs that Alastair Darling created.

Let's wait for a few months and reconvene on this one, shall we?

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21 comments

Mon, 2011-09-19 07:53 — Benedict

Wed, 2011-08-31 16:52 — Clare (not verified)

@ Danny

"It is clear that there has been a growth in private sector jobs over the last year of over 500,000. But the last year refers to the period March 2010 to March 201.Given the coalition didn't take office until May 2010 -- and its policies would not have taken effect until much longer after that date --it is entirely disingenuous then the Chancellor to claim credit."

Danny isn't this a bit of a contradiction to the narrative you've been trying to spin on the growth figures. You stated the poor GDP numbers were entirely due to slasher apparently and yet these fairly positive jobs number arethanks to the prudent administration of the previous government? Doesn't make sense to argue both angles does it you end up looking a bit opportune.

Wed, 2011-08-31 17:05 — David Blanchflower1

Clare
Both GDP and employment were growing under Labour. The coalition took office and removed the policies that were working. This put these positive outcomes into reverse.

It takes some time for the effects on jobs to register in the official labour market data. So employment in the second half of 2010, for example, is likely to be almost entirely attributable to policies implemented a year or so earlier.

Not opportune at all. Osborne is shamelessly claiming success for job creation that is mostly none of his doing and it is part of my job to point that out

Danny Blanchflower

Wed, 2011-08-31 17:27 — Clare (not verified)

Ah ok Danny so the q4 2010 UK gdp number -0.5% was entirely the coalitions fault even though the austerity measure didn't start until q2 2011 and they were still sticking to labour spending plans at this time? Danny do you actually believe that?

Wed, 2011-08-31 17:56 — Chris (not verified)

@Clare

"Ah ok Danny so the q4 2010 UK gdp number -0.5% was entirely the coalitions fault even though the austerity measure didn't start until q2 2011"

From May 2010, the coalition started talking down the economy. They scared the hell out of everybody with their "Britain is bankrupt" rhetoric, go take a look at consumer confidence surveys.

"and they were still sticking to labour spending plans at this time?"

Wrong, the coalition did not stick to Labour's spending plans. They immediately cut spending by £6bn in that financial year.

Wed, 2011-08-31 18:19 — Clare (not verified)

You are right about the 6 billion apologies, but actually government spending went from £669bn 09/10 to £697bn 10/11 that's still a 4.2% increase in government spending year on year hardly a contraction.

Second your point on confidence is not valid at all, if you care to look at the confidence index shown on Danny's previous post there is no evidence of any significant confidence dip in May 2010 when the government came in. What is scaring the hell out of everyone NOW is a Euro collapse casued by excessive Sovereign debt.

Wed, 2011-08-31 19:32 — Luddite (not verified)

85% of all new jobs created under Labour went to immigrants..

Wed, 2011-08-31 20:25 — sammy (not verified)

93.4% of people who call themselves "Luddite" are racist Tory pricks..

Wed, 2011-08-31 20:46 — matthew fox (not verified)

@Sammy

Don't lower yourself to Luddite and Clare's level.

Yes Luddite is a fool, but don't let him get to you.

Wed, 2011-08-31 22:04 — Awake!

Mr Blanchflower
aha! so we need to give the ONS MORE money to get MORE bEAN COUNTERS- that's one of your first concrete solutions to 'investing in jobs'
erm, is that actually sustainable- and ACTUALLY, a 3 month rolling avg is a FAR better way to compile this number than monthly-
Anyway, we have now a single CONCRETE scheme that you would advocate to improve employment- more beancounters!!

Wed, 2011-08-31 23:52 — Boomandbuster (not verified)

@Matt

matt you are the future stand for parliament judging by the standard of lab mps you'd fit right in with those dumb heads.

sammy please don't waste the letters on such garbage

awake you seem to have something to say i'll leave you alone

danny - i have to listen to your torrid nonsense on my trading floor via bloomberg every day where you are a contributing editor, how much do they pay you to talk suchrubbish? a birdy tells me you don't pay as much uk tax as you should is this true?

luddite where did you pull that stat from I don't believe it. Are you so stupid as to think we can build a fence round the UK?

clare you seem to have some brains which is more than can be said for matt but you are just ranting on here, please grow up get out there and get some action you frigid knickered loser.

chris take your head out of the sand man find out what a structural deficit is

Wed, 2011-08-31 23:58 — Chris (not verified)

@Clare

"but actually government spending went from £669bn 09/10 to £697bn 10/11 that's still a 4.2% increase in government spending year on year hardly a contraction."

"Second your point on confidence is not valid at all, if you care to look at the confidence index shown on Danny's previous post there is no evidence of any significant confidence dip in May 2010 when the government came in."

Don't be silly - go take a look at the nationwide & GfK surveys, you'll see things start going downhill in Oct10. Coinciding with Osborne's spending review and the point at which every other sentence a coalition MP uttered was "Britain is bankrupt".

"What is scaring the hell out of everyone NOW is a Euro collapse casued by excessive Sovereign debt"

LOL! Yeh, that is all I hear about down the pub - endless discussions about Brady bonds and fiscal union...NOT

The vast majority of consumers are not worrying about the eurozone, they're worried about state of the UK economy. Cameron & Osborne & Clegg have told them Britain is bankrupt, that savage cuts must be introduced, that services they use must be cut.

Thu, 2011-09-01 02:42 — Awake!

chris
and interestingly, a lot od eople 'down the pub' are sick of paying for the moronic decisions that they now have to live with. and the 'man in the pub' gets what a lot of 'Left wing economiists and policy makers' don't get cos he hasn't lived their ridiculously privileged lives- he gets that debts, are debts are debts- be they govt or private, and he also gets that greeks lobbing petrol bombs cos theyre being asked to do half a weeks work whilst some dumbarse poloitico tells him 'its all ok, europe dontuknow' , the man in the pub gets thats its effed- thats why he starts paying down his debt, he probably has real responsibilities, something the last government didnt know the meaning of-

Thu, 2011-09-01 04:03 — Mr. Divine (not verified)

Danny, you're right it does take time for macro policies to take effect and Osbourne is taking credit for past policies of the Labour government. But Clare is also right when she said you have used similar time figures in the past to discredit the Conservatives. You don't appear sincere as a result.

Thu, 2011-09-01 08:24 — Clare (not verified)

hmm chris so you don't think the possibility of the euro imploding and the us debt ceiling have any impact on uk consumer confidence? are you really so stupid as to think the uk exists in an economic bubble and ppl are that naive? as for what you say the gfk number, it was -19 when the coalition came in and was -19 in october so you are making your facts up there. it fell off a cliff in jan on the back of the lousy gdp number and the euro crisis so is somewhat lagged. this low confidence in q1 coincided with a 0.5% q1 growth number in the uk. so as I say the correlation between this confidence number and growth are extremely weak. If you are a stat head take the 3 month average and see how strongly it is correlated to 3 month quarterly growth you'll find that the Gfk survey is not at all a good predictor for growth (been negative for the whole of the last 18 months and yet we've incredibly had growth how has this happened Einstein?). So really to say the Q4 2010 growth number sits solely at the coalitions door is one eyed at best.

Thu, 2011-09-01 11:48 — Robert Taggart

What about the 500,000 of us scoungers who do not want to work ?
Does Gideon not care ? !

Thu, 2011-09-01 14:06 — E Hart (not verified)

There are c.500,000 vacancies and nearly 2.5m out of work. Still, by 2015 the Regional Enterprise Zones will, in George Osborne's words, "hopefully" have create 30,000 new jobs.

If you take part-time employment and "under-employment" then the figures are around 6.5m. This is a systemic problem both for the economy and society. It is a criminal waste of talent and it is a depressent to the economy. People on low wages don't provide a major impetus to anything other than discount retailers and pound shops. They treading fucking water. They might as well be cutting sugar cane or bananas in the Dominican Republic. Low wages are also a major damper on the savings-loans dynamic because their income doesn't permit them to borrow very much (that's even supposing they can)and they've nothing to save.

Once this shower of shite of has been turfed out the economic and intellectual colossus that is the Labour Party can try to come up with some ideas to put this right. Don't hold you breath. They are Tory Lite and - as it happens - very lite on ideas. One thing they could do, which they won't, is buy up the remaining shares in the banks in which the government has holdings (that's supposing that Osborne doesn't sell them off to the parasites)and turn them into co-operatives. Note: In 2010. The Mondragon Co-operative in Spain had 1% unemployment compared to over 20% in the Spanish economy as a whole. It employs nearly 90,000 people and also runs the country's largest retail chain, Eroski etc.

We need new and different models, too. Does anyone seriously believe that the UK economy on its present track is ever going to do anything about the millions un-and-under-employed? Don't be stupid. How can it? The economy is flat. It'll knock 1m off it at best having made the present situation worse through this purblind policy of austerity. Politicians in this country have neither the wit not the imagination to see where they are taking us. Furthermore, we will continue to see our economic sovereignty going to all points East and South West because capital can make more of a killing there than it can here. Not only that we've lowered corporation tax - I'm sure no other countries will think of that (not) - as an incentive to keep businesses here. It's vapid. It's a futile Dutch auction.

Large-scale unemployment is here to stay because there is no political will to do anything about it. To think we vote for these people.

Sun, 2011-09-04 09:48 — Luddite (not verified)

matthew fox: look here 1%. I'm very surprised you can still see the keyboard with all that self-abuse you do?
sammy: So how many 'new jobs' created under the previous Labour government went to immigrants?

Sun, 2011-09-04 10:59 — matthew fox (not verified)

Look here Luddite, my simple minded friend, I can see my keyboard quite clearly.

Would you like to know that Gordon Brown did to curb Banker's bonuses?

Thu, 2011-09-01 15:06 — Vic Singh

"Clare
31 August 2011 at 17:19

Second your point on confidence is not valid at all"

if you think that Clare you are living in cloud cuckoo land. Ask people like me who actually work out there.

The tories have done nothing but talk down the economy and have damaged confodence beyond repair.

Thu, 2011-09-01 22:21 — Awake!

partnerships, co-operatives, totally agree E hart. AND to those who don't think they deliver or are uncompetive , look at John lewis. Staffed by people whomactually CARE about what they're selling you, because they are treated so much better.