Searching for the cloud

The UK employment report for May, released this morning, was so much better than expected that it took BBC News more than an hour to find anything negative to gripe about -- though of course, now that they've found something, they've put it at the head of their coverage of the story in every subsequent news bulletin.

Unemployment fell; the jobless claimant count fell; the unemployment rate fell; employment rose; vacancies rose. Ah, but wait: of the 160,000 increase in employment over the survey period, 148,000 represented part-time jobs. So the job market isn't really that strong, is it?

It all depends on how you look at it. In one sense it's a bit surprising that any new jobs are being created at this relatively early stage in the recovery. Remember all the predictions before the recession, that the number of unemployed would rocket up to 3 million and more? It never happened, presumably because employers chose to hold onto workers rather than risk losing them and then having to hire them back at greater expense when recovery arrived. You'd think that the flipside of that would be virtually no job creation now that growth prospects have improved, so the fact that so many jobs have been added in the last three months is surely positive.

How about the preponderance of part-time jobs? The BBC and others are suggesting that most of the part-timers would prefer to work full time and are having to accept shorter hours because of the weak economy. We know this isn't true, because the ONS survey specifically identifies people in that position. While the number of part time jobs rose 148,000 from March to May, the number of people saying they were only working part-time because there was no full-time work available rose by only 21,000. Of the 7.8 million part time workers (a record number), only 1.07 million report that they would rather be working full time.

Overall, these numbers suggest that recent heightened fears of the dreaded "double dip" recession are overblown. The economy still has some forward momentum, and the likelihood that the looming VAT hike will pull some big-ticket consumption into late 2010 from next year should keep growth in positive territory at least until year-end. Next year, with the VAT hike and the start of actual spending cuts (most of what's been announced so far is the cancellation of spending plans, not actual cuts, but that's going to change), the risk of a double dip will be much greater. Could somebody please tell the BBC?