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.

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.

A

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

A

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.

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