The latest jobs market data provided further evidence that the labour market in Scotland continues to weaken. The positive element in the latest figures was a strong fall in unemployment of 14,000 or -6.4%. In the UK, unemployment also fell by 37,000, a much weaker fall of -1.5%.
Yet, the jobs market was much weaker in Scotland. Employment fell by 24,000, or -1%, in Scotland. But in the UK net new jobs were created. Employment rose by 90.000 in the UK. An increase of 0.3%.
So, falling unemployment in Scotland provides an illusory view of the absolute and relative state of the Scottish labour market.
It is also incorrect for the media to report the latest statistics as yet another fall in unemployment in Scotland as the BBC did here. In the data published last month a fall of 19,000 was reported. Now there is a fall of 14,000. But we are dealing with quarterly data not monthly data. The latest quarterly data published today compares the quarter September to November with the previous June to August quarter. Last month's data compared August to October with the previous quarter. Hence in the quarterly data published this month and last month, two of the three months are the same: September and October! The latest figures add November and exclude August.
So, while unemployment fell this quarter, it rose by 7,000 in the previous quarter after falling successively by 3,000 and 13,000 in the two quarters before that.
However, as I noted in earlier posts on the Scottish labour market - here and here - one reason for the apparently stronger unemployment performance in Scotland has been the rising number of inactive workers. In the latest quarter the numbers inactive in Scotland rose by 42,000 or 2.7%. In the UK in contrast the inactive number rose by absolutely less, 39,000, an increase of only 0.2%.
My hypothesis is that the rising inactive numbers in Scotland is a consequence of disproportionate weakness in the Scottish jobs market. 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.
The hypothesised 'real' level of unemployment is some 80,000 higher than the official rate and on a rising trend.
It is what is happening in the jobs market that, I think, explains this rising trend in 'real' unemployment.
The latest fall in employment is included in the chart below which shows Scottish employment since the start of the recession.
With the latest data, Scottish employment is 96,000 or -3.7% below its pre-recession peak. It currently is only 23,000 above the trough of the 2008-2010 recession. Any recovery that there was in Scottish jobs faltered after the March - May 2011 quarter and has essentially stagnated ever since.
However, that is not the end of the story because it gets worse!
The working population is rising in Scotland so if you express employment over the total number of workers economically active and inactive we get the next chart.
The situation is now worse than at the worst of the recession with employment- working population ratio now -5.7% below its pre-recession peak compared to -5.6% in the trough of the recession.
I know that we must not put too much store by one month's or one quarter's figures. I know also that the Labour Force Survey has a fairly small sample and so is subject to sampling errors which are large.
Yet, my judgement leads me to believe that what we are dealing with here is not measurement error but a real problem in the Scottish jobs market.