Pretty Picture Masks a Gloomy Truth; ANALYSIS

Article excerpt

Byline: ALEX BRUMMER

THE fall in the headline unemployment rate to the lowest level in 27 years, despite the immense difficulties of the global economy, looks at first blush like a Christmas story come true.

But take a closer look at the official Government data and a very different picture emerges.

We begin to see a British economy where jobs in the wealth- creating export and financial industries are vanishing and employment in the public sector is marching upwards.

There are two ways in which we measure the numbers of people in or out of work in Britain.

The traditional method simply counts the numbers of people receiving the 'job seeker's allowance' - the modern version of the dole.

Then there is the International Labour Organisation survey which interviews a broad cross-section of the population to establish patterns of employment.

This latter method - known in this country as the Labour Force Survey - is preferred by world economic organisations.

In November there was a wide divergence between the figures collected.

The traditional unemployment rate painted a rosy picture of a Britain enjoying unprecedented prosperity with just 3.7 per cent of the workforce without jobs, a fall of 6,200 since October.

The broader LFS measure shows something very different.

In the three months August to October the jobless rate surged to 1,532,000, up by nearly 20,000 from the previous quarter. This, in fact, was the highest level for two years.

SINCE many economic experts regard unemployment as a leading indicator - one which tells you about future economic trends - this rise is rather ominous for Gordon Brown and the Government. It suggests there could be a stagnating economy ahead.

The headline unemployment rate which shows an improving jobs market is distorted by two factors. In recent years the Government has toughened the conditions for those receiving unemployment benefit, so it has become a very spare measure. …