UK ministers, businesses and interest rate-setters face months of uncertainty over the true state of the labour market after the statistics watchdog warned that it remained unable to certify the reliability of official data.
Rob Kent-Smith, deputy head of the Office for Statistics Regulation, told the Financial Times there was “a way to go” before it re-endorsed official jobs numbers, leaving policymakers in the Treasury, Bank of England and across central and local government unclear on basic questions about the workforce.
The rollout of a “transformed” Office for National Statistics labour force survey (TLFS) — intended to resolve problems that have beset the data — has been delayed until September.
And the OSR, an arm of the UK Statistics Authority, is also doubtful whether interim data sets based on the old survey will improve quickly enough for it to relabel them “accredited” official statistics before the TLFS comes in.
Kent-Smith said that while the ONS releasing figures based on its labour force survey again marked “an important step forwards”, there was “clearly still a way to go” before reassessing their quality.
At present, the LFS-data are termed “official statistics in development”, meaning they are useful but might not fully meet standards on quality.
Whether the OSR conducted a reassessment would depend on “how long it takes for the LFS improvements to bed in and the TLFS to come on stream”, Kent-Smith said.
His comments followed the release last Monday of updated jobs figures that had been on hold since September, owing to a sharp drop in responses to the survey underpinning them.
The ONS has now published these after reweighting them to reflect new information on the UK population, and will on Tuesday release new figures covering the period to December.
But the agency has warned users to be “particularly vigilant” about the volatility of LFS-based data in the coming months, especially when looking at detailed breakdowns. It is not yet able to publish the full range of breakdowns, or the microdata usually available to researchers.
The OSR is set to begin a review of the figures this week, looking at what the ONS has done to bolster its survey and the agency’s plans to improve it further. But efforts to repair the LFS — by boosting the sample size and putting more researchers into the field — will take time.
The gap in the data is an acute problem for BoE policymakers. They view labour market pressures as being among the main risks that could keep inflation above target and delay a move towards cutting interest rates from 5.25 per cent, a 16-year high.
Ben Broadbent, a BoE deputy governor, warned in December that uncertainty about unemployment could force the central bank to wait longer before safely concluding inflation was on the way down. Price growth stood at 4 per cent in December, with data for January due on Wednesday.
The BoE has developed its own estimates of wage growth, drawing on a range of alternative surveys. But its governor, Andrew Bailey, said this month that doubts over the LFS were “posing challenges” because there was “no real alternative” to gauge unemployment.
The Office for Budget Responsibility, which is finalising the forecasts that will underpin the government’s Spring Budget, said in November that problems with the LFS had made it “more difficult to assess the starting point for our labour market forecast”.
But the LFS matters to a much wider group of users because it is the only big, long-running survey providing detail not only on workers’ hours and pay, but on issues such as their contractual status, health and motivation.
It informs policy on welfare and workers’ rights, workplace safety and social mobility, local growth plans, employment support for people with health conditions and disabilities, and efforts to address inequalities.
Jonathan Portes, professor of economics and public policy at King’s College, London, said the newly reweighted data was a step forward for the fiscal watchdog and in providing a guide for welfare policy decisions because it meant “we can be a bit more confident about what’s happening on inactivity and sickness”.
But others said the volatility in data for more recent months cast doubt on even these longer-term trends, since it was not yet clear whether higher rates of sickness keeping people out of work were a post-Covid anomaly.
“The most difficult thing has been not having the underlying microdata . . . we rely on it a lot in our day-to-day work,” said Hannah Slaughter, senior economist at the Resolution Foundation think-tank. She is researching the extent of precarious work but is unable to tell whether a tightening labour market has given workers more security.
Tera Allas, director of research and economics at consultancy McKinsey UK, said the lack of “gold standard” data also affected private sector employers.
“Businesses need a good sense of what the temperature of the labour market is,” she said, noting that the ONS was still unable to publish figures showing how people were moving in and out of jobs and why — a crucial leading indicator of pay growth.
Alpesh Paleja, lead economist at the CBI business lobby group, said the LFS’s “nuance allows you to build a holistic picture of the labour market”, adding: “At a time when measures of labour market slack are so important for monetary policy, and monetary policy is so important for business . . . it’s a big gap in our understanding of the economy.”
