Can we trust unemployment statistics?

On the economics front this week we have unemployment statistics being released on Wednesday. There is a chance that the official unemployment rate plunges to a record low of 2.X%. Will I trust the number – hell no, will I trust the general tenor of what the result is pointing towards – heck yes.

Why won’t I trust the number?

Well, unemployment statistics are a weird beast. They only pick up people who are actively searching for work and are available to start immediately. Quite a small subset of the unemployed fit this specific description and so the past few months’ figures will have been artificially dragged down by huge numbers of people stuck isolating at home with covid or waiting out the wave before they make their next step.

But even if the official unemployment number itself is artificially low, I will still trust the general tenor of what we are likely to see. That is – we have very few people out of work at present, and that lack of available labour is holding down the ability of industries to fill roles. The upshot is we are likely to see wage growth begin to pick up further in the statistics.

Engrained expectations of wage increases will be further fueled by the general inflationary environment. Workers are beginning to challenge employers to sharpen the pencil and give them a wage lift to beat the rising costs of living. Many employers are being forced to meet these demands, as the threat of an employee joining the ‘great resignation’ and looking for greener pastures with someone else is very real at present.