An error that large would be hugely consequential for BoE rate-setter. — Bloomberg
LONDON: The United Kingdom has underestimated the number of people in employment by almost one million, according to a new report that casts further doubt on official estimates that are crucial for the Bank of England (BoE).
The Resolution Foundation said the employment rate has bounced back to pre-pandemic levels after its own estimates from tax and population data found an extra 930,000 more in work since 2019 than recorded by the Office for National Statistics (ONS).
It suggested worker inactivity is lower than thought, the think tank said, potentially rewriting the narrative of the labour market in recent years.
An error that large would be hugely consequential for BoE rate-setters who are struggling to gauge the tightness of the jobs market as they consider how quickly to reduce interest rates.
BoE governor Andrew Bailey and his colleagues have guided markets towards a “gradual” pace to rate cuts, though they warn that the ONS data problems have made making that judgment far more difficult.
Last year the ONS temporarily withdrew its key Labour Force Survey measuring unemployment, employment and economic inactivity after a plunge in response rates that threw into doubt its accuracy.
While it is publishing the estimates again, officials do not trust the data and the ONS is working on a replacement survey.
“Official statistics have misrepresented what has happened in the UK labour market since the pandemic, and left policymakers in the dark by painting an overly pessimistic picture of our labour market,” said Adam Corlett, principal economist at the Resolution Foundation.
“Crafting good policy is made harder still if the UK does not have reliable employment statistics.” — Bloomberg
