Poor jobs data a ‘substantial’ problem, says Bailey in Mansion House speech

The UK’s unreliable labour market statistics have become a “substantial problem” for the Bank of England, which is making interest rate decisions without accurate data on how many people are in the workforce, Andrew Bailey said. In a speech to City financiers at Mansion House on Thursday night, the Bank’s governor made his most pointed comments yet about the failure of the Office for National Statistics to collect enough reliable data on the jobs market. The UK’s official statistics body is failing to get enough people to respond to its monthly Labour Force Survey asking about their employment status for the past 18 months, forcing the Bank to rely on alternative measures as it makes key decisions. “The travails of the Labour Force Survey are quite well known,” Bailey said. “It is a substantial problem — and not just for monetary policy — when we don’t know how many people are participating in the economy. It would help if across the country we were better at answering the phone when the ONS calls up.“I do struggle to explain when my fellow governors ask me why the British are particularly bad at this. The Bank, alongside other users, including the Treasury, continue to engage with the ONS on efforts to tackle these problems and to improve the quality of UK labour market data.”Britain has suffered from a sharp drop in labour force participation after the pandemic compared with most other advanced economies, where people have begun rejoining the jobs market in the past two years. The ONS publishes the Labour Force Survey every month but has warned that unemployment and economic inactivity may be less pronounced than its recent data suggests. The inactivity rate fell to 21.8 per cent — a 0.4 percentage point decline over the quarter — in the latest numbers for the three months to October. The statistics body has said that it has boosted the number of interviewees for its survey from 44,000 in September last year to 59,000 this year. “We advise caution, particularly when interpreting short-term change in the Labour Force survey, and encourage users to make use of a wide range of data sources where possible,” the ONS said last week. In his speech, Bailey warned that labour supply data is important in measuring the overall supply capacity of the UK economy, which has been hit in recent years by trade restrictions caused by Brexit, energy price shocks and falling investment. The governor also called on Rachel Reeves, the chancellor, to preserve the openness of the UK economy, as the government and others across Europe await potential new trade tariffs set by the incoming Trump administration.
The lord mayor of London is calling for the UK to revamp its Individual Savings Accounts (Isas) to boost investment in the UK economy.
Addressing the annual Mansion House forum, Alastair King called on the government to “look at the model again — not mandating anything but saying that if you want your full tax break, you need to be investing in the UK, which would bring us into line with what our competitors do.
“Redirecting this money from non-productive to productive assets would help scale up British companies, improve returns for savers, and democratise the market by letting many more people participate. It would require a change in the rules, but not a charge to the exchequer. And we could do it in short order.”