Politicians and the press like to quote figures for “new jobs” created in the private sector, despite the absence of a measure for “new jobs”. Changes in private sector employment are more complicated than they appear at first glance. Below are five things to consider next time you hear about new private sector jobs:
1. Employment does not equal jobs: Published data refers to the number of people employed not the number of jobs. As one employed person may have multiple jobs, the employment level and number of jobs are not equal.
2. Net, not new: Although we can say that there are more people employed we don’t know how many are new; people new to private sector employment will be offset by people leaving private sector employment.
3. Private sector employment was boosted by reclassifications from the public sector: Large groups of people previously employed in the public sector are now counted in the private sector, even though they may not have changed job. Private sector employment was boosted by 196,000 when further education and sixth form college corporations in England were reclassified from public to private sector, in Q2 2012. The sale of Royal Mail moved 146,000 people from public to private sector in Q4 2013. Most recently, in the first quarter of this year Lloyds Banking Group moved back into the private sector (after moving into the public sector in Q4 2008) boosting private sector employment by 92,000.*
4. Private sector employment may be underestimated: Private sector employment is estimated as the difference between total employment, and public sector employment. This may understate private sector employment, as the public sector employment figures will include individuals whose main job is in the private sector but who have a second job in the public sector.
5. The date chosen will make a difference: Changes are often measured from 2010 to make comparisons since the election. Private sector employment increased by 294,000 between the last quarter before the election (February-April 2010) and the first quarter after the election (May-July 2010). The size of the increase since 2010 will depend on which quarter is used as a baseline.
What is clear though, is there has been a large increase in private sector employment over the past few years regardless of dates or reclassifications.
James Mirza Davies
* Estimates of private sector employment excluding the impacts of major reclassifications are available from the ONS Public Sector Bulletin.