What’s going on in the UK economy?

What's going on in the UK economy?

It may never be possible to know exactly how an economy is performing at any given time. But recently it has become difficult to get a clear picture of the UK economy, especially the labor market.

This month, Britain’s Office for National Statistics delayed the release of its major report on jobs to give it more time to “make the best possible estimate” of how many people are or are not working.

When it was released a week late on Tuesday, The report relied on a new “experimental” data series For employment and unemployment rates, tax and state benefit data are being used instead of traditional surveys of households, which have become less reliable as more and more people are refusing to participate.

For some analysts, the new data have raised concerns about the usefulness of the information at a time when the labor market is under intense scrutiny. Bank of England policymakers are analyzing employment data for signs of persistent inflation so they can determine how aggressive monetary policy needs to be in response.

Tuesday’s data showed that the labor market was running as cold as last month, with higher unemployment and fewer job vacancies. It marks the beginning of a turnaround that policymakers hope will ease persistently high inflation, which was stuck at 6.7 percent last month. The Bank of England raised interest rates to their highest level since 2008, and officials have indicated they will remain high into next year.

But the latest labor market release needs to be taken “with a big pinch of salt,” Philip Shaw, an economist at Investec, wrote in an analyst note. He argued that Bank of England policymakers have “missed another important set of data” to guide them in setting interest rates.

The delayed report comes as widespread questions have been raised about the quality of Britain’s economic measurements and forecasts. last month statistics Office issued specifically Big improvement in the size of the economy after the pandemic lockdown, other economic institutions including Bank of EnglandWhereas, it has been criticized for underestimating inflation an independent fiscal watchdog revealed “material errors” in its forecasts.

Statisticians have recently focused on how to get more real-time economic data amid a series of major disruptions to the economy, from the pandemic to the energy crisis. Also, old data-collection methods have become difficult to maintain in the digital age.

The Labor Force Survey, which began in 1973, is intended to provide a comprehensive measurement, based on thousands of respondents, of how many people are and are not working, and why. Families are interviewed by phone five times every 13 weeks.

The survey has suffered a rapid decline in response rates for a variety of reasons, including people not wanting or not having the time to answer phone surveys. The pandemic also ended in-person interviews. The rate of people willing to participate has dropped from about 50 percent a decade ago to about 15 percent.

National Statistical Office Working on a “Convert” Survey It will ask more people about their engagement with the job market in new ways, mostly online. This will be used to publish data from next spring.

Darren Morgan of the Statistics Office said these “radical plans are part of a wider long-term strategy” to reduce reliance on traditional surveys. Wrote in a blog post on Tuesday, The agency is also using more data sources in other key figures, including value-added tax data to calculate GDP and web-scraped store data to measure inflation.

The Statistics Office said that during this transitional period, there will be some “temporary disruptions”.

But the new data series came after Bank of England policymakers expressed skepticism about other data from the Office for National Statistics. Last month, minutes of a central bank meeting said it was difficult to match ONS pay data with other data sources.

All of this coincides with central bankers placing extra emphasis on incoming economic data to guide their policy decisions, as they look to raise interest rates high enough to stem inflation without causing unnecessary economic damage. Let’s try.

For now, those decisions are hanging on a knife’s edge.

“Clearly the absence of key data on the labor market is unhelpful, especially at a time when ‘data dependence’ is the guiding principle for policymakers,” Mr Shaw wrote.

Tony Wilson, director of the Institute for Employment Studies, said Tuesday’s experimental data made it difficult to draw firm conclusions.

If “normal service” doesn’t return soon, it could take until next spring and a new labor force survey, he said in a statement, “before we can get a better idea of ​​what’s going on.” Is.”

two months ago Statistics office surprises economists a major upward revision For GDP in 2021. Rather than making a typically slow recovery from the pandemic lockdowns, the UK economy actually surpassed its pre-pandemic size by the end of that year. Previous estimates had said it was about 1 percent smaller.

Hugh Dixon, head of research for economic measurement at the National Institute of Economic and Social Research, said on the organisation’s website this month that the amendments make Britons no better or worse off than before.

He added, “However, measurements reflect our perceived reality and in this sense, they influence policy debates and the effectiveness or otherwise of government policies.”

The bleak picture of the British economy could also impact investment decisions and Britain’s efforts to boost economic growth.

“Investors have watched the UK economy through these regular releases of data over the past few years, with the UK lagging behind,” said Simon French, head of research at investment bank Panmure Gordon. Low share prices and weak investment trends may partly be the result of “some of the pessimism associated with this data,” he said.

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