Puzzle of rise in jobs as economy shrinks further

Posted on 15 Aug 2012

The number of people out of work fell to a new low in June, despite the worsening double-dip recession.

Data has shown that the number of Britons out of work was the lowest in nearly a year throughout the three months over the summer.

The Office for National Statistics (ONS) said that the number of people claiming jobseeker’s allowance fell by 5,900 in July, a bigger drop that what had been initially predicted.

A wider report by the International Labour Organization [sic] agreed with the stats, saying that the number of jobless fell by 46,000 in July.

These figures will come as good news to the government, although this decline in unemployment was attributed mainly to the increase in jobs created by the London 2012 Olympics.

Whether this rise in employment can be sustained is a factor that will worry economists, who are predicting that the economy will shrink even further. This rise in employment and shrinking of the economy is becoming something of a puzzle to economists, who expect these two measures to shrink accordingly.

“What a difference a day makes,” said Ranvir Singh, CEO of the market analysts RANsquawk. “In the space of 24 hours, the UK seems to have begun creating jobs and prices have risen.

“The markets surged on the upbeat jobs numbers, but no one is fooled by the surprising data. The economic indicators are simply not reflecting reality at present.”

The government has been hoping that private companies will make up for jobs that will be lost in its spending cuts, and there continues to be some hope for the manufacturing industry as some UK manufacturers remove their operations from lower-cost countries such as China.

At the recent summit on advanced engineering excellence held at the British Business Embassy in London, Deputy Prime Minister Nick Clegg announced deals that will lead to the creation of thousands of jobs within engineering.

A recent survey also found that engineers were most in demand in a tough job markets.

These latest ONS figures were not all good news and revealed a worrying trend of inflation outpacing earning increases, which will dent consumer spending power.