finance

ONS ‘experimental’ data lowers UK unemployment rate to 3.5%


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The UK unemployment rate fell to 3.5 per cent in the spring, according to early findings from a new survey from the Office for National Statistics that suggests the jobs market is stronger than previously thought.

The figures — which match a low seen only once since the 1970s — were quietly released in an ONS spreadsheet last month and contrast with the official estimate of 4.2 per cent for the second and third quarters.

The ONS has not drawn attention to the data, however, and cautioned that these are the “very early” and “highly experimental” results of its new Transformed Labour Force Survey. “We would put no weight on the rates,” the ONS warned.

The TLFS is set to be formally introduced next March, aiming for better response rates and a larger sample size than the previous survey, but the ONS is still developing and testing the questionnaires.

The new figure, if confirmed, would match a low seen only once since the 1970s, in summer 2022, and suggest the British economy has been more resilient than expected to higher interest rates.

The lower figure would feed into a Conservative narrative of a rebounding economy after a recent ONS upgrade of UK GDP growth.

But it would underline the extent to which pressures in the labour market are still fuelling inflation, which the Bank of England expects will not fall to its 2 per cent target until 2025.

The ONS has come under political pressure over the reliability of its data after revisions to GDP figures that showed the UK had bounced back from the pandemic better than indicated by the agency’s initial estimates.

The upgrade of post-pandemic growth in September was heralded by chancellor Jeremy Hunt as evidence that “those determined to talk down the British economy have been proved wrong”.

“That was deeply frustrating,” said one Treasury insider. “The fact the original ONS data was wrong caused untold damage about the way the public and business viewed the British economy.”

The UK’s Office for Statistics Regulation watchdog said on Wednesday that “extreme” criticisms of the way the ONS had handled the revisions were misplaced.

But it added the agency needed to do more to improve public understanding of the uncertainty around its estimates, especially when a revision “challenged prevailing narratives about the UK’s economy”. 

The ONS has not published its usual range of workforce data for the past two months, because the old labour force survey on which much of it is based had become too unreliable to use due to declining response rates.

The agency’s current best estimate, which reflects recent trends in tax records and benefits claims, is that unemployment remained steady at 4.2 per cent between the second and third quarters of the year.

The new survey showed unemployment edging up to 3.8 per cent in the three months to August.

The ONS’s old labour force survey had in recent months painted a weaker picture of the jobs market than other business surveys, and significantly contrasted with evidence that wages were still growing rapidly.

The new TLFS figures were published on October 24 but have not been previously reported.

“Further critical improvements were still to be implemented to the questionnaire to better estimate the levels of employment, unemployment and economic inactivity,” an ONS spokesperson said. 

But the ONS also said the TLFS data were “much more closely aligned” with its latest estimates of employment and unemployment than the raw results of its older survey.

Its latest estimates are produced by adjusting these raw figures for recent trends in payroll taxes and work-related benefit claims.



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