Employment up – but is it just an Olympic boost?

Unemployment in London is falling far quicker than anywhere else. Are the Olympics distorting the figures?

An Olympic security guard stands watch. Did the Games boost employment? Photograph: Getty Images

Employment is on the rise.

201,000 people have found jobs since last quarter - a 0.4 per cent increase that has led to the highest employment rate since 2009. Furthermore, unemployment has dropped by 0.2 per cent to 8 per cent, meaning that 46,000 fewer people are out of work. Active population has risen by 117,000 to 9.1 million, meaning that 0.3 per cent more people are vying jobs.

A disproportionate amount of this rise in employment has come from London, leading some to believe that we are floating inside a rose-tinted Olympic bubble.

Unemployment is down 1.1 per cent on quarter, compared to the UK average of 0.2 per cent. Similarly, quarterly employment has increased by 1.4 percent, as opposed to the national average of 0.4 per cent. However, temporary employment in the capital has seen a 4.2 per cent yearly decrease; a figure that would seemingly contradict the notion that the buoyancy of the labour market is fleeting. At a national level, temporary workers as a percentage of total employed labour force has remained largely unchanged at 6.3 per cent for the past two years. This may suggest that the April-June 2012 figures are unaffected by the previous (infrastructure) and future (Games-related services) demand for temporary work. While the short-term employment impact of the Olympics is undeniable, truly illustrative figures are yet to come.

Indeed, London is doing well relative to the rest of the country (particularly when compared to Yorkshire and the Humbert, East Midlands, and West Midlands, where unemployment actually increased this quarter), but so is the North East, for instance, noting a quarterly decline of 0.9 per cent in unemployment.

Nonetheless, there is reason to consider the figures with guarded optimism. As recent trends have shown, the increase in employment defies economic logic when GDP barely limps forward. As quoted by the Financial Times:

"The implication is that either the economy is doing appreciably better than the national accounts data show, the labour market is doing significantly worse than the hard data show, or productivity has genuinely weakened sharply," said Howard Archer, an economist at IHS Global Insight. "The jury is currently very much out as to what the actual answer is but it could very well be a combination of all three."

As noted in previous analyses of labour data, productivity seems to have slumped in the wake of declining capital investment. This troubling scenario is compounded by underemployment. Part-time employment has risen 1.9 per cent this year (0.7 per cent this quarter). But more worryingly, the percentage of people who have forcibly undertaken part-time work for lack of a better option has increased by 12.6 per cent since last year (1.1 per cent quarter-on-quarter).

Moreover, of the 201,000 newly employed, 12,000 are unpaid family workers, representing a 12.4 per cent quarterly increase and 17.7 per cent year-on-year. In a similar vein, self-employment has increased by 0.9 per cent this quarter, and government supported training and employment by 17.7. These numbers suggest that that the 0.4 per cent increase in employment is more hollow than hoped. There are 0.1 per cent fewer employees compared to last year, insinuating that employement has been artificially increased by government programmes and that people have been forced into entrepreneurship.