According to the Office of National Statistics, the unemployment rate in the UK in the three months to June fell to its lowest level for almost a year. The data revealed that the jobless rate had fallen by 0.2 percent, while total unemployment decreasing by 46,000. However, as the GDP continues to shrink, many experts are trying to understand how job growth could be accompanied by economic contraction – two situations that completely contradict each other.
Across the UK, employers managed to create 130,000 full time jobs, with 117,000 fewer people defined as economically inactive. What has surprised many economists, however, is the fact that GDP data shows that the UK economy has contracted for three successive quarters, comparable to the situation in Spain where unemployment has recently risen to record highs of almost 25 percent.
Despite the rise in temporary jobs at the London Olympics, youth unemployment has marginally increased from 20.2 to 20.3 percent. This suggests the competition for graduate positions remains fierce, with degree leavers struggling to find full time work due to a lack of positions being available. To add more doom and gloom, official July 2012 figures from the UK's Higher Education Statistics Agency revealed that almost a quarter of graduates who finished university in 2011 were working in part-time roles, while 9 percent were unemployed.
Unsurprisingly, many of these new jobs - half in fact - were created in London, which has promoted numerous City analysts to attribute the drop in unemployment to the Olympics. Howard Archer, an his Global Insight economists, suggested either productivity had 'weakened sharply' or the economy and the GDP were 'doing appreciably better' than what the national data appeared to show.
Another worrying finding is that the number of people who have remained unemployed for 12 months or more has failed to fall, while the shadow work and pensions secretary Liam Bryne even went as far to suggest that '90 percent' of the overall reduction in unemployment was in London alone.
When Parliament reconvenes in September, the Government is expected to defend its economic policies on the basis of these unexpected findings. However, the proof of the pudding will be in the next series of employment data, which will determine whether or not these recent reports are a mere 'blip' in the challenging economic climate or an underlying trend to a genuine long term recovery.