Measuring Unemployment

My recent post on the results of the latest Quarterly National Household Survey (QNHS) provoked some discussion of the Irish unemployment data. I thought it would be helpful to follow up by comparing the evidence available from three measures of unemployment, namely, the Live Register (LR) and two series derived from the QNHS.

The LR data are based on administrative records of those ‘signing on’ for various entitlements, principally Jobseeker’s assistance and benefit. It also includes some people who are working short-time, as well as some seasonal and casual workers who are not fully unemployed, and some people gaining credited social welfare contributions who may not be actively seeking work. In fact Central Statistics Office in its monthly release of the LR figures warns that they are not designed to measure unemployment.

The QNHS is designed specifically to measure employment and unemployment. Similar surveys are conducted across the EU with the aim of providing internationally-comparably measures of labour market performance. The widely-quoted measures of employment and unemployment from the QNHS are based on International Labour Office (ILO) definitions. To be ‘ILO unemployed’ a person must in the week before the survey be without work but available for work and have recently taken specific job-search steps.

A separate measure of unemployment is also published in the QNHS, based on the concept of ‘Principal Economic Status’ – that is, what the respondent considers his or her ‘usual situation with regard to employment’ .

The following Figure shows how these three measures of unemployment have behaved since 2007.

(The LR figures are published monthly. Quarterly averages have been calculated for comparability with the QNHS data. The figures have not been seasonally adjusted.)

The most important showing is the broad consistency of the three measures, especially with regard to changes in the level of unemployment. There is no evidence of a trend in the divergences between the series.

As is to be expected the LR is consistently higher than the ILO measure of unemployment. The excess has varied from a high of 68 per cent in 2007 Q1 to a low of 36 per cent in 2012 Q2. There was a marked downward trend in the ratio between 2008 and 2012 – in times of rising unemployment the gap between the two measures narrows, but as the labour market improved from mid-2012 onwards the ratio has risen. ILO unemployment has fallen by 71,000 since mid-2012, the LR by only 54,000.

The PES measure falls consistently between the two other series, but closely tracks their movements.

In recent years both here and in the US increased attention has been devoted to ‘discouraged workers’ – people who are no longer seeking employment because they believe there are no jobs available. In response to the desire to improve the measurement of unemployment during the recession, a new series on the ‘Potential Additional Labour Force’ (PALF) has been presented in the QNHS. This includes ‘persons seeking work but not immediately available’ and ‘persons available for but not seeking work’.

Since it was launched, the PALF series has followed the same broad pattern as the three measures of unemployment shown in the Figure. Over the course of 2013 the numbers include in the PALF have fallen from 60,000 to 49,300.

Much further analysis could be performed on the these data. It would be interesting to look at the series by age and sex, for example. But suffice for the moment that all the available evidence paints a consistent picture of recent developments in the Irish labour market.

Some Very Positive Labour Market Numbers

The results of the Quarter 4 2013 National Household Survey are available here.
The year-on-year increase in the numbers at work of 3.3% is all the more remarkable in view of the continuing decline in public sector employment.
The overall unemployment rate (seasonally adjusted) fell from 12.7% to 12.1%, and the long-term rate from 8.2% to 7.2%.

Google’s Tax Planning

The Dutch Sandwich and Double Irish figure prominently in this FT article about Google’s tax returns for 2012.
It seems that Google Netherlands Holdings, which represents the Dutch part of the sandwich, received €8.6bn in royalties from Google Ireland Ltd last year.

Suicide and the Recession – again

Seán Ó Riain’s post and links to the recent British Medical Journal article on suicide and unemployment call for an extended comment, although, as Brian Lucey points out, the topic was discussed in a recent post.

The estimates of the number of suicides attributable to the recession in the BMJ article are based on the trend in suicide rates over the eight years 2000 to 2007 pooled over 54 countries compared with the rates recorded in the years 2008, 2009, and 2010. The discrepancies between the actual and extrapolated rates were used to infer the impact of unemployment: The authors summarize their approach as follows:

To examine whether suicide rates rose more in countries with worse economic downturns, we used Spearman’s correlation coefficients to investigate the association between suicide rate ratios in 2009 and percentage point changes in unemployment rates between 2007 (the baseline year) and 2009 (unemployment rates (in %) in 2009 minus unemployment rates (in %) in 2007 across study countries.

As may be seen from Figure 1 the Irish suicide rate hardly changed between 2007 and 2010 – rising from 10.5 to 10.9  When deaths “due to external causes of undetermined intent” (a category generally viewed as referring predominantly to suicides) are included, the rate actually fell from 13.2 in 2007 to 12.7 in 2010. Looking beyond 2010, using preliminary data based on year of registration, both measures of suicide were stable in 2011 and 2012.

Taking a long-run perspective, the econometric evidence contained in Walsh and Walsh, 2011 shows that the Irish suicide rate has been only weakly correlated with the unemployment rate. Other factors seem to have been at work.  For example, the suicide rate rose sharply during the period of falling unemployment in the second half of the 1990s, which coincided with a surge in per capita alcohol consumption. The suicide rate declined during the first half of the noughties – particularly among younger males – coinciding with the start of a steady decline in alcohol consumption.

The following Figure shows the suicide and unemployment rates since the 1960s and brings out the lack of correlation between them. In particular, the recent surge in unemployment seems to have had a surprisingly weak impact on the suicide rate.
While it might be claimed – as is done in the BMJ article – that had unemployment not risen, the suicide rate would have fallen below its present level, but extending the earlier econometric work down to 2012 suggests that the influence of the unemployment rate on suicides has remained relatively weak and confined to males aged 35-54. These age groups account for about 30% of all suicides. Suicide among males in other age groups and among females, which account for 70% of the total, do not appear to be significantly influenced by the unemployment rate.

We must be careful not to attribute too much of our current suicide problem to the downturn in the economy and / or the measures that have been taken to correct our fiscal imbalances.

Good News on the Labour Market

The CSO released the results of the Quarterly National Household Survey for Quarter 2 2013 this morning, together with their population estimates for April of this year and the components of population change over the previous twelve months.

The news is mostly positive, showing clear evidence of a recovering labour market.

The level of employment has risen, with full-time employment up for the first time since 2008. Private sector employment is growing fairly strongly, offsetting the decline in public sector numbers.

Although still very high, overall unemployment is down and long-term unemployment has fallen as a proportion of the total.

The population increased only marginally between April 2012 and April 2013. The slowdown in population growth was due to (i) the continued high level of net emigration, with an increase in the outflow of Irish nationals, and (ii) a sharp fall in natural increase, due to the drop of almost 5% in the number of births.