Last week, some business organisations predicted that the economic downturn was ending and that the UK economy was set to recover by 2010, although the majority of economists remain convinced that unemployment will continue to rise beyond three million by the end of this year.

During this doom and gloom, casual reading of the latest jobless statistics would suggest that Wales has bucked the trend. Last month, the latest data showed that, in contrast to the rest of the UK, unemployment actually fell in Wales for the period April-June 2009.

Naturally, this was instantly seized on by some politicians as evidence that the economic policies pursued by the Assembly Government were paying dividends as compared to the rest of the UK.

However, if we examine the statistics in detail, there may be a very different story emerging.

Let’s take, for example, the case of unemployment, which is officially defined as “those without a job, want a job, have actively sought work in the last four weeks and are available to start work in the next two weeks or who are out of work, have found a job and are waiting to start it in the next two weeks”.

In Wales, unemployment fell by 2,000 to 107,000 people out of work which is still 37,000 more than a year ago but a welcome change in the previous trend.

In such circumstances, if unemployment went down, you would then naturally expect for those in employment to increase as people move from looking for a job to actually starting one. However, during the same period, the actual number in employment actually went down by 10,000 in Wales.

The question is what has happened to these workers? Have they left Wales and registered for unemployment elsewhere in the UK and therefore do not show up on the statistics? Alternatively, have they moved directly to becoming what the statisticians call “economically inactive”, that is, “those who want a job but have not been seeking work in the last four weeks, those who want a job and are seeking work but not available to start work, and those who do not want a job”?

This seems the most logical answer as the number of economically inactive in Wales went up by 17,000 during the same period as unemployment went down, although this is a strange result as one would naturally expect those who had lost their jobs to be looking for work unless, of course, they felt this was a largely pointless exercise during the current economic recession when it has been estimated that there are 100 people going for every job vacancy.

What is worth pointing out that these statistics do not measure the actual level of employment or unemployment and are merely extrapolations from a sample of respondents to the Labour Force Survey (LFS).

Indeed, statisticians are at pains to point out that the quarterly changes for Wales are subject to a larger sampling variability than for the UK as a whole. Given this, it is interesting to note that, in contrast to LFS unemployment, the number of those registering for Jobseekers Allowance in Wales continues to rise and is 35% higher than a year ago.

One of the reasons put forward for this reduction in unemployment is that Wales, despite the denials of Welsh Ministers at the time, probably entered the recession sooner than the rest of the UK.

Indeed, in the period April to June 2008 alone, there were thousands of redundancies announced by a range of large manufacturers including 3M (185 jobs), Corus Llanelli (300 jobs), Fenmarc (190 jobs), Kimball (160 jobs), Flexsys (163 jobs), Paramount Foods (150 jobs) and AB Electronics (157 jobs).

Others have suggested that unemployment is going down because initiatives such as ProAct are playing a vital role in keeping people in jobs, although the fact that employment itself has declined during the past three months weakens this argument.

Even if we look positively at the job data, our economy has some way to go before it recovers, especially if we examine other indicators. For example, UK output has gone down 6% since 2008 – twice the depth of the recession in the early 1990s – and corporate tax receipts for July were down 38% as compared to last year.

More worryingly for Wales, the UK is also set to borrow £200 billion by April 2010, which will put enormous pressure on Government spending.

This will inevitably lead to job cuts in local and national government and will hit those regions, such as Wales, which depend most on the public sector.

With more than one in five of all Welsh households having no adults in work, the spectre of unemployment is one which will continue to haunt this recession and it is clear that, despite the rose-tinted views of some politicians, we are not yet out of the woods.

Rather than pretend everything is fine, I would hope the Assembly Government will increase its efforts to ensure that the private sector is fully supported in creating jobs in the next few months. Only then will we finally see unemployment begin to fall in Wales.

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