London: A think tank revealed on Wednesday that nearly 1 million workers in the UK may be unaccounted for in official labour market statistics, complicating the Bank of England’s (BoE) efforts to determine the appropriate pace for cutting interest rates. The Resolution Foundation raised concerns that the official methodology, which is currently being revised, may also be overstating the number of people who have left the workforce.
According to the think tank, the BoE has lowered rates by half a percentage point since August, a move that lags behind the European Central Bank and the U.S. Federal Reserve, primarily due to ongoing concerns about inflationary pressures in the job market.
“Official statistics have misrepresented what has happened in the UK labour market since the pandemic, leaving policymakers in the dark and presenting an overly pessimistic view of the workforce,” said Adam Corlett, principal economist at the Resolution Foundation.
Since the onset of the COVID-19 pandemic, the Office for National Statistics (ONS), like similar agencies worldwide, has faced challenges in securing responses to its surveys. This issue has drawn criticism, with BoE Governor Andrew Bailey describing the state of the data as “a substantial problem” just last week.
The Resolution Foundation suggested that the ONS has underestimated the increase in the number of people employed since 2019 by approximately 930,000. Using alternative data sources—such as tax office records, self-employment statistics, and updated population data—the think tank tracked employment trends and found a sharp divergence from official employment figures after 2020. This estimate, however, closely aligned with official numbers before the pandemic.
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According to the foundation’s analysis, the employment rate likely peaked in 2023 at levels seen before the pandemic, with a slight decline in 2024, returning to roughly the same level as in 2019. This contrasts with the official data, which indicates a lower employment rate, a discrepancy that stands in stark contrast to the high vacancy rates and robust wage growth observed in the country.
Prime Minister Keir Starmer has set a target of increasing the employment rate to 80%, up from the current official estimate of 74.8%.
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Corlett emphasized that while the government’s aim to raise the employment rate remains a challenge, achieving this goal is made even harder without accurate and reliable employment statistics. “Crafting good policy is made harder still if the UK does not have reliable employment statistics,” he said.
