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Reality that lurks behind Northern Ireland's unemployment statistics

Paul MacFlynn

Economy Watch by Paul MacFlynn, senior economist, Neri


The claimant count is different to the official measure of unemployment

The claimant count is different to the official measure of unemployment

The claimant count is different to the official measure of unemployment

Figures from the Labour Force Survey last week showed that unemployment remains at historically low levels in Northern Ireland.

The seasonally adjusted rate of unemployment in Northern Ireland was recorded at 2.4% in the last quarter of 2019. While this is one of the lowest rates ever recorded, it is actually slightly up on the rate of 2.3% recorded in the three months that ended in November 2019.

Northern Ireland's unemployment rate is significantly below that of the UK average, which still stands at 3.8%.

However, of late, we tend to hear less about the claimant count. This is a measure of the percentage of the population in receipt of unemployment benefits. It is not the official measure of unemployment but it is an indicator of joblessness nonetheless.

The claimant count is different to the official measure of unemployment because not all people who are unemployed are actively claiming unemployment benefits.

Also, to qualify as unemployed under the official measure, a person has to have actively sought work in the last four weeks.

For these reasons, it is possible for the number of people claiming unemployment benefits to be above or below the official rate of unemployment.

While the number of people claiming unemployment benefit has, in the past, been higher than the number of people officially unemployed, it tends to be the exception to the rule. The claimant count is nearly always lower than the rate of unemployment.

For this reason, the claimant count was often the go-to statistic for government press releases about the Northern Ireland economy. Not only was the number itself lower than the rate of unemployment, but the claimant count fell at a steadier pace after the financial crisis.

So why have we heard so little about the claimant count over the last few months? If I were cynical, I might suggest that the absence of press releases regarding the claimant count is because the tide has turned. Or at the very least, the tide has stopped.

Both the claimant count and the unemployment rate were decreasing up until the last few months of 2018.

After that the unemployment rate continued to fall, but the claimant count stopped.

It has barely moved in over a year.

Despite record levels of unemployment in 2019, there has been no change in the claimant count.

There are now almost 30,000 people recorded as claiming unemployment benefits and only 20,000 recorded as officially unemployed.

This is the largest gap that has ever existed by some distance.

There has been no increase in the numbers of people classified as 'economically inactive' so the only explanation is that there are 10,000 people who are claiming unemployment benefits that we are no longer classifying as unemployed.

In order to understand what may be happening here we should examine a very important change in the benefits system which took place just as this trend emerged.

Universal Credit was introduced on a phased basis for new claimants in Northern Ireland from September 2017 up until December 2018.

The claimant count measures those claiming Job Seeker's Allowance but now also measures those receiving the unemployment element of Universal Credit.

Specifically, it now covers all people claiming Universal Credit who are in the 'searching for work' category, i.e. people actively looking for work.

This has led to a significant increase in the number of people brought into the claimant count.

The Office for National Statistics claims that any increase in the claimant count is therefore due to a definitional change rather than economic conditions.

In order to illustrate this, they have put together a new claimant count which retrospectively adjusts the figures to reflect what the claimant count would have been if Universal Credit had been in place since 2013.

This has the advantage of showing a more dramatic rate of decline in the claimant count since 2013, but a number of problems remain unresolved.

Firstly, looking at the new claimant count figures, in 2013 the claimant count would have been 83,500 as opposed to the 65,000 that was reported at the time. The official unemployment level at the time was 68,000. That is a significant gap.

Secondly, while the rate of decline in this new claimant count is greater than that of the regular claimant count, both series stop their decline in 2019.

If this new claimant count series measures all of those who would have been included in the claimant count under Universal credit up to now, then it should not have been affected by the actual rollout of Universal Credit.

The most obvious problem is that there are now a significant number of people that we are classifying as unemployed for the purposes of the benefits system but not recording them as unemployed for official statistics.

This is a discrepancy that should not be allowed to linger.

In next week's Economy Watch, we hear from Lisa Wilson of Neri.

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