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Unemployment and Underemployment - How Much Pain has the Recession Really Caused?

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Wednesday's figures show that unemployment has fallen for the first time since May last year. This should come as a big relief after months of turmoil in the job market, but the headline number hides another type of pain: underemployment.

Some rather dispiriting trends lurk behind the overall job numbers. A large rise in part-time employment has provided some symptomatic relief, yet a closer look reveals that there has also been a drop in the number of people working full-time. And many of the people working part-time are doing so because that's all they can find - one of the stats you will hear a lot today is that there are 1.4 million people in that position. This is the highest figure since records began (in 1993), and it has increased by a staggering 220,000 over the past year.

Unfortunately, the hidden pain doesn't stop with part-time work - there are also lots of people who have been pushed into temporary work. There are another 620,000 temporary workers who can't find a permanent job, and again this figure has increased over the last year.

And then there's self-employment to consider. An extra 140,000 people have moved into self-employment over the last year, while there are 160,000 fewer "employee" jobs (i.e., jobs working for someone else). This isn't necessarily a bad thing - it may be that people are responding to the recession in an entrepreneurial fashion by setting up their own businesses. However, I strongly suspect that this figure reflects people being pushed out of paid work and forced to go it alone.

When you add up the numbers, it's clear just how serious this underemployment problem is. There are just over 2 million workers who either can't get enough work or are trapped in insecure employment. That's on top of the 2.6 million people who are unemployed altogether. And the TUC have done analysis suggesting that underemployment is even higher than these numbers suggest.

To put these figures into context, it's worth comparing them to "normal" job market conditions. The Office for Budget Responsibility (the government's official forecaster) reckons that the "natural" rate of unemployment is around 1.7 million. In other words, unemployment is almost 1 million higher as a result of the recession.

So what about underemployment? The average number of part-time workers unable to get full-time work was around 650,000 over the "good years" (1997 - 2007). This means it is currently 750,000 higher than normal, a huge increase as a result of the recession. Doing the same thing for people trapped in temporary work shows that there are around 150,000 more people in this category than would normally be expected.

These are only rough calculations, but they give us a powerful impression of how much pain the recession has caused. There are nearly a million extra people unemployed than normal, and another 900,000 who are either underemployed or trapped in insecure jobs. The damage this causes to people's lives should not be underestimated.

There are a few signs that the job market and the economy are picking up, but there is a long way to go. Unemployment problems typically take years to reverse, and there remains enormous competition for a limited pool of jobs. Tackling the jobs problem - both headline and hidden - must remain top of the government's agenda.