Claimant Unemployment Rate

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The claimant unemployment rate is the percentage change of people claiming for unemployment related benefits over the total number of full-time and part-time jobs available in the UK. The claimant count measures the total number of people claiming for unemployment related benefits at Employment Services Office.[1] The claimant count provides the longest available data series on UK unemployment, but had since been replaced by the ILO (International Labour Office) as an international standard.

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Claimant count, inflow and outflow, United Kingdom[2]

One advantage of the claimant count is that it gives an accurate picture of who are claiming for the benefits. It is also timely as unemployment figure using this standard is not difficult to measure. However, this method of tracking unemployment rate also has its disadvantages. First, should the benefits system change, the number of people who are eligible for it also changes. Second, this measure does not take into account those who are unemployed but do not bother to claim for the benefits. Last but not least, the measure of workforce jobs available might be overstated as people with two jobs might be double counted. In this case, the claimant unemployment rate might appear lower than it actually is.[3]

Why is it important?

Although unemployment rate is commonly used as a lagging indicator, it it nevertheless an important signal of overall economic health. This is because consumer spending is highly correlated with labor conditions.[4] When unemployment rate is high, consumer spending will decrease, and that means slow economic growth and less corporate profits. This will push stock markets down and cause investors to become more risk adverse and flee to safer investments like bonds. On top of that, a contracting economy will also lead to declining interest rates, hence, boosting the bond markets instead.[5]

References

  1. Office for National Statistics
  2. Office of National Statistic
  3. Economics by Lipsey and Chrystal
  4. Forex Factory Calendar
  5. FINRA: Economic Indicator Calenda


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