Weirdness and statistics

This recession has often been compared to the Great Depression of the 1930s

LAST week brought the second consecutive shock in the Welsh employment mystery.

In the three months to July, some 220,000 people lost their jobs in the UK. But in Wales there were 2,000 extra jobs, which is weird. That’s a small (0.1%) – but significant – difference to all of the rest of the UK. And last month saw a similar pattern. So double weird.

The worst areas for unemployment in Wales remain, Blaenau Gwent (7.9% overall and 11.4% for men) and Merthyr Tydfil (7.1% overall). But unfortunately the standard reports do not explain the specific areas where Wales is outperforming the UK. However, there are some clues.

Wales’ industrial base often draws comparisons with the North East (15,000 more unemployed, or 1.4%) and Northern Ireland (5,000 more unemployed, or 0.7%). Over the past year, employment in manufacturing in the UK went down by 6.7%. The only other sector that comes close to that is finance – not likely to elicit much general sympathy – and business services, which was only 2.8%. Manufacturing now makes up just 9.4% of all UK jobs. And whereas the finance industries will eventually replace those jobs, it’s unlikely that any new mass employer would choose Wales before China in the future. This represents more long-term, bad news for Wales.

Maybe the answer lies in Wales’ Achilles Heel, the relative weakness of the private sector. Over the last decade in the UK, the public sector gained 285,000 jobs, while the private sector lost 683,000 positions.

But the good times for the public sector may soon be coming to an end. We know that the financial settlements handed down from Westminster are going to get tight as the Government becomes caught between the increased costs of public debt and the decreased revenues from all forms of tax. Corporation tax will drop as companies make less profit, VAT will drop alongside consumer depending, and income tax will drop as more people are out of work.

There’s another piece of weirdness.  There has been a lot of media coverage on how the current recession will strike especially hard at the young. Increased unemployment. Wales was possibly the first place to hear this, when David Blanchflower, at his lecture in Cardiff Business School earlier this year, highlighted such risks.

Sadly, he has been proved right. But there is one age group which has seen reduced unemployment, and that’s the over 65 for men and over 60 for women. This group has experienced an increase of 1.7% in work across the UK. The USA has seen similar increases for many months. And the reason is as frightening as youth unemployment, because all the research suggests that these so-called retired workers have seen such a huge drop in their investments – through property and pension funds, stock markets and lower interest rates on savings accounts – that they have been forced back to work. It’s a pretty depressing thought.

One final last statistic. Buried deep on the National Statistics web site is the most recent data (from March 2009) of employment sector analysis. Welsh jobs in various services stands at 466,000. There are only 8,000 Welsh jobs in Agriculture, forestry and fishing.

So where is the good news for Wales? Clearly, we need more private sector jobs. But, for business, creating jobs is a by-product of success. It’s not the success itself. Often businesses try to reduce employment, by implementing automation and efficiencies. It can be confusing to see how super-efficient, still-emerging economies such as South Korea have strong employment. But these countries also have profitable companies.

This is the balancing act that Wales has to achieve. Increasing employment while working towards prosperitycould be something of a paradox, but we have to seek out solutions along these lines if the country is to throw off this recession.