The Office for National Statistics (ONS) made its regular monthly announcement of the Labour Market Statistics (LMS) – commonly known as the unemployment figures – today. They showed the North East jobless rate to be up by 0.3% to 4.7%, while the UK rate is up 0.2% to 3.7%.
The North East rate is the highest in the country, ahead of London and the West Midlands, both on 4.3%. Lowest is the South West on 2.1%.
This came two months after the 15 November figure of 4.2%. which the ONS stated at the time to be a record low for the region.
Though the North East figure has crept up, it is still close to its long-term low; it peaked at 13.3% in 1993, and was at 11.6% as recently as 2011.
However, today’s unemployment statistics, as usual, raise as many questions as they answer. The North East’s unemployment story is extremely complex and nuanced. Some of the answers are less obvious than they may appear.
Exactly where, geographically, is the North East? Over what period are the figures at a ‘record low’? Who counts as unemployed? What about the so-called economically inactive, towards whom both the government and North East policymakers are starting to turn their attention?
There is evidence in today’s figures, which cover September-November 2022, that by the autumn the cost-of-living crisis was already driving people back into the labour market, especially in the north. Economic inactivity fell by 0.6%, the biggest reduction in the UK, in both the North East and North West.
Finally, which are the most relevant current statistics to use? The ONS publishes figures which are on one hand helpfully comprehensive but on the other can lead to confusing inconsistencies. Today’s numbers may be compared with those a month ago, a year ago, or with the previous rolling three-month figure.
It is the last of these, which cover a period long enough to show a trend but short enough to be reasonably up to date, which are discussed here. They cover September-November 2022 and are compared with June-August 2022. Other reports may use other comparison periods.
Place and time
The first two questions, relating to the geography of the North East and the historic reach of the statistics, are closely linked. When I first looked into the question of unemployment for the Evening Chronicle in 1971 I wrote in terms of the North East, but the statistics I used were those for the then Northern Region.
The region’s boundaries have been subject to several changes over the past six decades. When Lord Hailsham of Marylebone, Lord President of the Council in the then Conservative government, was appointed as a special commissioner to investigate conditions in the North East in 1963, and donned a flat cap to venture into the region, it included what was then the North Riding of Yorkshire.
Four years later, when the famous, or infamous, Dan Smith produced his economic plan, Challenge of the Changing North, its title gave away the fact that its geographic reach too extended beyond the present North East; it covered Cumberland and Westmorland (now Cumbria) as well.
A decade after that, in 1977, the Strategic Plan for the Northern Region still covered Cumbria, as well as a place called Cleveland, apparently unfamiliar to some even then, and half-forgotten now. Documents for a symposium on the Strategic Plan the same year noted that: “There is one coloured general reference map of the region to remind readers where Cleveland County is and how Cockermouth [Cumbria] sits in relation to the A66(T).”
No wonder the people of what is now Tees Valley were happy more than 30 years later to be freed from what they saw as the supercilious dominance of Newcastle. The regional capital apparently treated Teesside as just as strange and remote as the Tory government had the North East as a whole 14 years earlier; it needed to be located on a map before it could be assisted.
The point of this digression into history is that when the North East’s unemployment is said to be at a record low, that means as far back as 1992; that is the point at which the ONS unemployment time series stops.
The region was split again in 2010, when the Coalition Government hived off Tees Valley (including Darlington), to the satisfaction of many in that area. Since then, what is confusingly still called the North East has lost another big chunk of territory and population to become what is known as North of Tyne but which now looks as though it is going to be re-united with its recent partners south of the river.
In the light of this chopping and changing of boundaries – which for a few years encompassed the even more long-forgotten Teesside County Borough – one wonders how the region has managed to survive as a statistical entity at all. But it has, and it is the figures since 1992 for the entire region from Berwick to Redcar that are discussed here.
Unemployment and inactivity
The number of people classified as economically inactive has been much, much larger than the unemployment rate ever since 1992, and almost certainly for much longer. Since the start of the pandemic, economic inactivity has been on the increase again nationally but even more so regionally, even as business reports labour shortages.
Taking the ONS’s preferred three-month rolling statistics, the UK unemployment rate in March-May 2020, just as Covid was taking hold, was 4.1%, compared with today’s figure of 3.7% for September-November 2022 as the pandemic appeared to have passed its peak, a fall of 0.4%.
In the North East, unemployment over the same period fell slightly more than the national figure, though remaining above it – down by 0.5% from 5.2% to 4.7%.
Economic inactivity rose, however, both nationally and even more markedly in the North East. The national figure went up by 0.7% from 20.8% to 21.5% and the regional rate by 2.5% from 22.3% to 24.8%.
The net result is that the employment rate – those actually in jobs – fell nationally from 75.9% to 75.6% but more substantially in the North East from 73.8% to 71.5%*.
The North East does not just have the highest unemployment in the UK; it also has the highest economic inactivity rate apart from Northern Ireland (26.6%) and Wales (25.2%) and the lowest employment rate apart from Northern Ireland (71.3%).
Put in human terms, there are now 8,945,00 people nationally and 405,000 in the region, all in the 16-64 age group, who are economically inactive, compared with only 1,244,000 nationally and 59,000 regionally unemployed. That looks like a huge waste of human resources at a time when the nation needs workers. But is it?
*The number of unemployed is for those aged 16 and over; % is a proportion of the economically active. The number and percentage of economically inactive are for those aged 16-64. The number of those in employment is for those aged 16 and over; the percentage is for those aged 16-64.
Economic inactivity: what’s the problem?
Those classed as economically inactive are not a homogenous group. They fall under five main statistical sub-headings. Using the latest available North East numbers, for October 2021-September 2022, these are: long-term sick (127,700), students (89,300), people looking after family/home (75,500), retired (61,800) and temporary sick (9,100). There are 43,400 classified as ‘other’. There is also a group too small to count regionally who are discouraged from seeking work.
Of all these, 89,800 say they want a job, and 317,700 say they do not. These are all, don’t forget, in the 16-64 age group, including the retired.
The North East Local Enterprise Partnership ((NELEP) noticed a worrying rise in economic inactivity last October. Responding to that month’s LMS, NELEP’s chief executive Helen Golightly said:
“It is a cause for concern that both nationally and in the region, we have seen the number of people in employment fall, unemployment fall, and further growth in the number of people becoming economically inactive – where they are not looking for work.”
A month later the government had woken up to the fact that this is national issue as well. In his Autumn Statement the Chancellor Jeremy Hunt said:
“I am…concerned that we have seen a sharp increase in economically inactive working-age adults of 630,000 since the start of the pandemic.
“Employment levels have yet to return to pre-pandemic levels which is bad for businesses who cannot fill vacancies and bad for people missing out on the opportunity to do well for themselves and their families. So the PM has asked the Work and Pensions Secretary to thoroughly review issues holding back workforce participation due to conclude early in the new year.”
While this undertaking does not look like being concluded early this year, it does appear at least to have begun. The BBC reported on 13 January that some people claiming sickness and disability benefits could be allowed to keep receiving payments even if they find work, under plans being considered by the government.
But this idea has provoked lively debate, not least inside the Conservative Party, about whether it is possible or even desirable to try to get the economically inactive to start looking for jobs. While it seems understandable that students are not (for the most part) in jobs and one presumes that the temporary sick will be returning to work once they recover, what about the three other main groups?
Fraser Nelson, writing in The Spectator last summer, under the headline “The ‘giant evil’ of idleness is back”, asked: “Are we really saying there are 1.7m people so sick that they are incapable of any work?”
He cited research showing that the rise in inactivity in the UK primarily reflected a rise in the number of long-term sick and speculating this could reflect long Covid, though it was unclear why that would be affecting the UK more than other countries.
“Quite”, commented Nelson. “So why are so many Brits signing off work sick? A subject that needs far more investigation.” That sounds like an implication of scrounging
The Prime Minister, in an article on the ConservativeHome website on 9 January, wrote: “We must get people back to work. It is to me as a Conservative unconscionable that at a time when businesses are crying out for workers, a quarter of our labour force is inactive.”
Henry Hill, on the same site two days later, however, argued that while the number of economically inactive might vex policymakers, there is nothing inherently problematic about a stay-at-home parent, a comfortable retiree, or. someone who cares full-time for somebody who would otherwise require state assistance.
Referring to the tireless worker who won the praises of Soviet authorities in the Stalin era, he commented:
“If you have earned enough to retire early and want to spend your twilight decades filing planning objections from a golf course somewhere, it is a strangely Stakhanovite instantiation of a small-government Conservative that refuses to let you.”
The role of devolution
One way to address the issues of unemployment and economic inactivity is through devolution. North of Tyne Combined Authority (NTCA) already has control of its devolved adult education budget and the new North East Combined Authority (NEMCA) will have the same when (if) it is set up in 2024.
But there is scope to go further. Northern Agenda (NA)reports that Greater Manchester, England’s devolution pioneer, is negotiating for new devolved powers as part of its “trailblazer” deal. Officials there want all future employment support programmes to be co-designed with and co-commissioned by them.
The same could be extended to the North East, which has been told by the government that as part of its new devolution deal it too will be able to negotiate a “trailblazer” deal, with talks starting early this year.
Tees Valley Mayor Ben Houchen, which already has control of its adult education budget, also backed the idea of going further. He told NA: “
[T[his is vital in allowing us to skill local people and enable them to take good quality jobs in their local communities without feeling like they need to move away to build a life, a career and a family.”
Jonathan Ashworth, Shadow Work and Pensions Secretary, told NA:
“[W]e should have more of this, not here and there where government ministers have agreed to do it as part of a devolution deal. It should be the norm across our regions.”
His vision, according to NA, is that the budgets for skills policy and also control of health funding should be handed to metro mayors…This way local officials who know their patches can design the schemes to get people back into employment but also tackle the health problems that stop millions from working.
Describing the current system, Ashworth says:
“Ministers sit in Whitehall and they look at the map and they try and decide what they think is needed. And the Department for Work and Pensions nationally commissions a contract. And some of the big outsourcing firms win these contracts and impose these national programs across the country.
“And somebody goes to the Job Centre; you sign on a bit like you’d sign on in the old dole office and get sanctioned if you don’t do all the requirements that they want.
“And if they think you need some extra help, they just refer you to one of these nationally commissioned programs. And nobody thinks that they’re giving people the proper help, and support and coaching that is needed.”
Reacting to today’s statistics, Helen Golightly, chief executive of the North East Local Enterprise Partnership (NELEP), said:
“The data released today shows that there has been an annual growth in employment of 1% and quarter increase of 0.4%. Whilst the North East remained at the bottom of the tables for overall employment and unemployment rates, we saw the second largest annual improvement in both these indicators amongst the nine English regions.
“We are seeing more people coming out of economic inactivity and into the labour market, with similar numbers finding work and moving to unemployed status, and actively seeking employment.
“This is probably an indication of the impact of higher costs of living with inflation at its highest level in recent years and people feeling the need to find ways of increasing their income.
“We can also see a drop off in demand for goods and services and for labour amongst businesses, particularly in smaller businesses. The latest regional vacancies data shows that online job adverts in the North East are only 5% higher than their pre-Covid benchmark, compared to 31% higher in November 2022.
“This indicates a declining confidence amongst businesses in the recruitment of new staff and will likely have contributed to an increase in those claiming out-of-work benefits in December.
“At this time, when people and businesses are focused on the cost of living and costs of doing business, it is notable that PAYE data released today saw pay rises averaging 6.4%. This was failing to keep pace with inflation caused by price increases in products including food and energy, which in real-life terms sees a further net drop in incomes of 2.6% for the third quarter in a row. Private sector pay growth nationally was running at 7.2% compared with just 3.3% in the public sector.
“As we progress through the winter, the cost of living will continue to be an issue of concern for residents and employers and is likely to continue to impact on sectors of the economy which rely on discretionary spending. For example, entertainment and transport were the sectors which had seen the largest decline in employment in this quarter.”
Callum George, Policy Adviser at the North East England Chamber of Commerce, said:
“In last month’s reaction to employment figures, we said that the unemployment rate would be worth keeping an eye on as the recession deepens. We know from our most recent Quarterly Economic Survey, that staff costs are one of employers’ main concerns going into 2023.
”We know that Prime Minister Sunak is determined to get people who are economically inactive back into the workforce, which is extremely important. However, if unemployment rates and financial pressures continue to worsen, businesses may also need more support in maintaining their current workforce.”