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The Bank of England will lack crucial insights on unemployment as it makes key decisions on interest rate cuts in the coming months after the rollout of a new official jobs survey was delayed until September.
The Office for National Statistics admitted on Monday that publication of figures based on its “transformed” labour force survey would be pushed back six months from the previously expected date of March.
The statistics agency stopped publishing unemployment figures using its existing labour force survey in September 2023, because a drop in response rates made the sample size too small to produce a reliable result.
Since then, the ONS has been working to boost response rates while pressing ahead with the introduction of the TLFS, which is conducted largely online with a new methodology.
New figures published on Monday were badged “official statistics in development” and analysts were sceptical about their reliability.
The ONS said the TLFS would become “the primary source of information on the labour market” from September so that it could run the old and the new surveys in parallel for longer to ensure the quality of the data.
In November, the ONS said its aim was to use the TLFS in place of the LFS from March 2024, as it had already been dual-running both surveys online, by phone and through follow-up visits for three calendar quarters.
Problems with the ONS labour market data have been a big headache for the BoE’s Monetary Policy Committee, as it seeks to assess how far wage pressures are fuelling inflation.
Andrew Bailey, the central bank governor, said last week that the ongoing uncertainties over official data were “posing challenges”, because there was “no real alternative” to the LFS for measuring unemployment.
On Monday, the ONS released LFS-based estimates of employment, unemployment and economic inactivity for the months it had missed, reweighted to reflect new information on the UK’s population.
The estimates suggest the labour market was tightening at the end of 2023, with the unemployment rate falling from 4.3 per cent in early summer to 3.9 per cent in the three months to November — compared with the ONS’s previous estimate that it had been steady at 4.2 per cent.
Analysts said if the figures were taken at face value, they could push the BoE towards keeping interest rates at 5.25 per cent for longer, until the bank had seen more sustained evidence of wage growth slowing.
But Jack Meaning, economist at Barclays, said that a falling unemployment rate was at odds with other data sources that have shown a clear slowdown in hiring and a rapid cooling of wage growth.
“We maintain some scepticism of the data. We think that there is a real possibility that we see a different narrative evolve when the TLFS data is published later this year,” Meaning said.
Annual wage growth in the three months to November was 6.5 per cent, down from a summer peak of 8.5 per cent.
The ONS figures also pointed to a higher rate of economic inactivity, with 21.9 per cent of adults aged 16 to 64 neither working nor jobhunting.
But the agency said reweighting the data to reflect the latest demographic information did not address the recent “volatility” in its figures. It advised “caution” over reading too much into short-term changes.
Monday’s reweighted figures do serve as a better guide than previous data to the overall shape of the UK’s workforce in the post-Covid period.
“Britain has a bigger, but sicker, workforce than we previously thought,” said Hannah Slaughter, senior economist at the Resolution Foundation think-tank.
The latest demographic data shows the UK population is bigger than earlier estimates, with more young people and women in particular.
After factoring this in, the agency’s reweighted estimates show the number of adults in employment was 170,000 higher than previously thought, at 33,136,000, in September to November 2023.
However, largely because of the increase in the young population, the employment rate was about 0.5 to 0.6 percentage points lower than previously thought over most of the period since summer 2022, standing at 75 per cent in September to November, the ONS said.
The unemployment rate was only slightly changed but the rate of economic inactivity — reflecting people who are neither in a job nor looking for one — was an average of 0.5 percentage points higher over the period covered, largely due to more people saying they had a long-term health condition.