The jobs market data published this morning show both employment and unemployment falling in Scotland. Total employment fell by 27,000 (-1.1%) in the quarter and by 7,000 (-0.3%) over the year. Yet, unemployment fell by 19,000 in the quarter and 25,000 over the year. The unemployment rate now sits at 7.6 percent, or 204,000, from 8.2% in the previous quarter.
The UK did better on employment with jobs increasing by 40,000 or 0.1% and rising by 1.7% over the year. But the drop in unemployment in the UK was 82,000, which was relatively less than in Scotland and so the UK rate only fell to 7.8 percent from 8.1 per cent.
However, the favourable Scottish unemployment performance is more apparent than real.
In the latest quarter there was a surge in the numbers inactive. That is there was an appreciable exit from the labour market with the inactive numbers rising by 50,000 or 3.2 percent. In the UK, too, there was an increase in the inactive numbers by 134,000. But that amounts to a much smaller rise than in Scotland of 0.7 percent.
The chart for inactive numbers in Scotland is shown below
Inactive numbers have been on a rising trend since almost the start of the recession, increasing by 102,000. This suggests as I noted in this earlier post that underlying unemployment is also rising as workers are discouraged by the lack of available jobs to cease looking for work and leave the labour market.
If, as before, I assume that the labour market was in equilibrium at the start of the recession then we can compute a 'real' level and rate of unemployment by adding back in this 'discouraged worker' effect. This is done in the chart below
On this basis, 'real' unemployment in Scotland is on a rising trend and rose in the latest quarter to 294,000 or 10.7 percent, not the 204,000 and 7.6 percent official figures.
That is a more true measure of the state of the labour market in Scotland.