The UK’s statistics agency, the Office for National Statistics (ONS), announced on Tuesday that the implementation of its updated labour market survey might be postponed until 2027.
This potential delay poses further challenges for the Bank of England (BoE) as it strives to understand inflationary pressures in the economy.
The ONS has faced difficulties in gathering survey responses since the COVID-19 pandemic and is currently revamping how it measures labour market activity. Accurate labour market data from the ONS is critical for the BoE, which uses this information to make key decisions on interest rates. BoE Governor Andrew Bailey recently referred to the unclear employment data as a “substantial problem.”
The BoE is closely observing labour market trends as it plans its next interest rate cut, following two rate reductions earlier this year.
The ONS noted several scenarios for rolling out its new Transformed Labour Force Survey (TLFS) but indicated that launching the revised system by mid-2025 is now unlikely due to concerns over data quality.
“Aiming for a 2027 completion would provide time to implement the shorter survey while continuing parallel runs with the current Labour Force Survey (LFS),” the ONS stated. The agency also expressed its intention to explore options to expedite the transition process.
The ONS is testing a shorter version of the survey to improve response rates and reduce completion times to approximately 15 minutes. Additionally, it plans to expand fieldwork efforts and is considering mandatory participation, as is practiced in some European countries.
An update on the timeline for transitioning to the new survey is expected in early 2025.
Recent analysis by the Resolution Foundation suggested that current official labour market data might underestimate the workforce by nearly one million people while overstating the scale of labour market inactivity.
However, the ONS, using revised population estimates, reported a slightly less severe issue with people leaving the workforce. It adjusted the inactivity rate for the April-to-June period to 22.1%, down from an earlier estimate of 22.2%. Despite this, the inactivity rate remains above the pre-pandemic level of 20.8%, unlike other nations where it has declined.
The ONS released revised employment and unemployment figures, estimating the employment rate at 74.6% (up from 74.5%) and maintaining the unemployment rate at 4.2%.
In terms of productivity, the situation appears worse than previously thought. The ONS revised its estimate of growth in output per hour worked for the three months to June, reporting a decline of 0.9% compared to an earlier estimate of a 0.3% drop.
These ongoing issues highlight the challenges in obtaining accurate labour market data, underscoring the importance of the ONS’s efforts to overhaul its methodologies. Photo by Londoneye at the English-language Wikipedia.