The private sector isn't picking up the slack

Over the last year 44,000 more public sector jobs have been lost than private sector jobs created.

By David Blanchflower Published 16 March 2012

Over the last year 44,000 more public sector jobs have been lost than private sector jobs created.

In two posts over the last week, Tory spinmeister David Smith has continued to make wildly misleading claims about the labour market. The public needs to have fact separated from fiction. This is advocacy pretending to be (bad) economics which needs to be exposed for what it is.

First, Smith had a column on 11 March in the Sunday Times entitled "Britain's jobs machine is still working" and then a blog on 14 March entitled "The jobs figures - not bad, could be better." In his column he made the claim that:

One of the enduring narratives of recent months has been that the private sector is not generating the jobs to offset cuts in the public sector. Fortunately it is not true. Since December 2009 public sector employment has fallen by 365,000 while jobs in the private sector have risen by 630,000.

Sadly it is true. I have no idea why he would claim it is not. In the blog he made a similar claim:

There's better news in the fact that private sector employment, up 683,000 over the past two years, has more than outweighed the drop of 390,000 in public sector employment (which is now down to 2003 levels) over the period.

That is factually correct but has very little to do with the current government's policies. The rise in employment was mostly driven by the last Labour government's policies. The vast majority of this increase in employment occurred before this government even took office.

The latest ONS data permits us to evaluate Smith's claims. I present results from table 4 of the latest ONS labour market release.

So let's just do a few calculations and see if Smith is right.

It is true that the number of private sector jobs is up by 273,000 more than the fall in the number of public sector jobs, but that is driven almost entirely by the rise in the number of private sector jobs under the previous Labour government. Up from 22,490,000 in December 2009 to 22,853, 000 in June 2010 or by 363,000.

Of course this rise did not occur under current policies, so it is entirely disingenuous for Smith to claim it did when it didn't. The most appropriate calculation surely would be to examine what has happened since this government took office. So if we take June 2010 as the starting point, private sector job creation was less than public sector destruction by 30,000. The figure is broadly similar if you do the calculation from September or December 2010, to allow for some time for the coalition's policies to take effect. Over the last year there has not been better news, the news has actually been exactly the opposite. The public sector job cull meant that net job creation was negative, of the order of -44,000. I have no idea how anyone in their right minds could interpret this as good news.

The right conclusion then is that one of the enduring narratives of recent months has been that the private sector is not generating the jobs to offset cuts in the public sector. Unfortunately this is totally and completely true.

This sort of biased analysis gives economics a bad name.

View the discussion thread.

39 comments

Sat, 2012-03-17 19:15 — Bee Clarke (not verified)

@ Luddite

"Labour spent 13 years decimating the private sector".

Except they didn't and the evidence provided by Danny Blanchflower proves they didn't. 22,490,000 private sector jobs in Dec 2009 increased to 22,853,000 in June 2010. An increase of 363,000 private sector jobs in 6-7 months.

I love the way you completely ignore the evidence! God help anyone if you ever have to do Jury Service!

Fri, 2012-03-16 22:32 — matthew fox (not verified)

Cameron and Osborne made sure Sir Alan Budd rushed out a jobs report predicting 2,000,000 new private sector jobs in 2010.

I suppose the " Happy Talk " brigade need to talk about about something.

Sat, 2012-03-17 20:01 — Marco (not verified)

So basically we've lost >200k unproductive jobs and produced >200k productive jobs.

Yes, we're just slightly behind the curve, but the cuts are front loaded and as the economy recovers which it will this will only improve.

Our economy is becoming more healthy again, it will just take some time.

Sat, 2012-03-17 20:13 — David Blanchflower1

For all this talk that Labour failed we should look at the data. The table in my column makes it clear that they were creating private sector jobs like gangbusters in 2010, which makes the Tory election rhetoric that Labour wasn't working rather hollow.

If you look at data between March 1999, which is when the current data series starts, and January 2008 public sector jobs grew by 557,000 while private sector jobs increased by 1,929,000. As a proportion public sector jobs went from 20.2% of the total to 20.4%. A rising tide lifts all boats.

From March 2008 to December 2009 public sector jobs rose by 340,000 while private sector jobs fell by just over a million. Overall from March 1999 to June 2010 the number of private sector jobs was UP 9000000. Not much decimating there my friends.

So Luddite's claim that the Labour decimated the private sector looks wrong, certainly in employment terms.

Danny Blanchflower

Tue, 2012-03-20 19:56 — matthew fox (not verified)

@ E Hart

You are totally on the money, doing things on the cheap.

To be fair to an employer, you can train someone, then have a rival snap up them up once they are qualified.

The state has to pick up the tab, and pretending otherwise is pure fiction.

Mon, 2012-03-19 15:15 — Indu Pendent (not verified)

@matt

You need to read peoples posts as usual/

"differrential saving of salary vs job seekers + top up benefits" = "The taxpayer funds JSA or didn't Inastew get the email?"

The differential between losing the salary cost and JSA is only the start of the net benefit to the tax payer.

You havent even got beyond first base. Q: How on earth do you expect to understand the argument if you dont even try? A: Matt, you obediently follow what your friends tell you without thinking for yourself.

Fri, 2012-03-16 23:03 — matthew fox (not verified)

Sorry for the double no, it should read " brigade need to talk about something "

Mon, 2012-03-19 15:41 — matthew fox (not verified)

That is an outrageous lie Inastew, I have hit more home runs then you have had hot dinners.

Tue, 2012-03-20 13:59 — E Hart (not verified)

British industry doesn't like training people because it costs money. I remember years ago electrical contractors bemoaning the absence of apprentices and trained electricians yet very few of their number was willing to pay for training. They wanted others to bear the burden for training their personnel. The rationale was simple, if deluded. They were concerned that the people they trained would go off elsewhere once trained. Clearly, they'd never heard of offering good pay and conditions of work or that all industries have a circulating pool of labour based on demand and good pay and conditions.

This is the British way. If you lack skills you import them because it is cheaper. This, of course, is very short-sighted because you make dependants of your own citizens, reduce the tax take and increase the financial burden on the exchequer. The private sector doesn't see this.

Mon, 2012-03-19 17:31 — Willp

Awake does have a point about immigration.

Since 2004, 600,000 more people from eastern Europe are working here and nearly 600,000 more young British people are unemployed. Last year, employment of 200,000 fewer British-born workers were in work and 200,000 more non-British-born workers were in work. More than 4.1 million non-British-born workers now work here.

East European workers are more willing to work for lower wages: 89 per cent of them earned less than £400 a week, compared to 57 per cent of British-born workers. Many of the locals who compete to get low-skilled jobs are black or Asian, while the new immigrants are white.

Controlling immigration is not racist. The EU, the employers and the ‘left’ all back the free movement of labour. The ‘left’ claims that workers can’t tell the difference between immigration controls and racism, but the ‘left’ defines immigration controls as racist, so they are the ones who cannot tell the difference between immigration controls and racism.

Where are British workers supposed to work, if not in Britain? Who is supposed to do the jobs in Britain, if not British workers? No to the free movement of labour.