Labour Market Flows, February 2013 (Experimental Statistics)

Abstract

These estimates of labour market flows are experimental statistics which have been produced as an aid to understanding the movements in the published Labour Force Survey aggregate estimates. They do not have National Statistics status and are not suitable as labour market indicators in their own right. The headline LFS estimates are published in the monthly Labour Market Statistical Bulletin.

Labour Market Flows

Background

In the Labour Force Survey (LFS) respondents are interviewed for five consecutive quarters over a 12 month period, with 20 per cent of the sample being replaced at each quarter. This allows for a longitudinal dataset to be created over a limited time interval, where respondents’ characteristics can be tracked over their time in the survey.

The ONS publishes population-weighted longitudinal datasets for each calendar quarter. These are available for each quarter since 1997 and can be used to analyse changes in labour market characteristics over two or five quarters. The datasets include "flow" variables, which estimate the size of the movements between the three main labour market statuses of employment, unemployment and economic inactivity.

Monitoring changes in the labour market status of respondents to the LFS aids the understanding of the quarterly changes in the levels of employment, unemployment and economic inactivity. These indicators are published as stocks for a given period, with changes expressed as the difference between successive quarters. These quarterly comparisons represent the net changes between the three labour market statuses. The underlying gross flows are usually considerably larger and may not correspond with those implied by the net changes. Estimates of the gross flows between the statuses can be derived from the LFS Longitudinal Datasets and are summarised in this article.

Method

There are two types of LFS longitudinal datasets: two-quarter and five-quarter. These are weighted using the same population estimates as those used in the main quarterly LFS datasets, although the weighting methodology differs (see technical note). Consequently the estimates are broadly consistent with the published aggregates, but not entirely. Also, the datasets are limited to people aged 16-64.

Both types of dataset contain a flow variable with eleven categories, with all combinations of employment, unemployment and economic inactivity accounted for, plus two categories for those entering and leaving the 16-64 population over the quarter. For the purpose of this analysis, those entering or leaving this population are excluded from the measured sample. The stock of the employed, unemployed and inactive at each quarter can therefore be estimated by summing the corresponding flow categories.

For this analysis, the two-quarter datasets have been used in order to gain some insight into the quarterly changes in the headline published aggregates. Also, the sample is more robust and less subject to sampling variation than the five-quarter counterparts (see technical note).

The charts

The charts in this article show the estimated gross flows, that is the total inflow or outflow for 16-64 employment, unemployment and inactivity from one calendar quarter to the next. They are seasonally adjusted. Analysis of the net flows, that is the difference between the total inflow and outflow, are also included and these are compared with the quarterly changes in the published aggregates, partly to give an indication of the robustness of the flows analysis.

Key messages for quarter 4 2012:

• For unemployment the gross inflow and the gross outflow both remained fairly stable with the outflow continuing to exceed the inflow, meaning that, overall, unemployment continued to fall.

• For employment, the gross inflow and gross outflow both showed little change in the latest quarter, with the gross inflow continuing to exceed the outflow. Consequently, the level of employment continued to increase overall. 

• The gross inflow to inactivity decreased continuing its gradually decreasing trend of the last two years. The gross inflow continued to be lower than the gross outflow from inactivity and so the level of inactivity continued to fall overall.

Quarterly gross flows

The diagram below shows the gross flow between each economic status between July-September 2012 and October-December 2012. The stocks for each status represent the latter period and are the seasonally adjusted aggregates for people aged 16-64.

Quarterly Population Flows - thousands of people, seasonally adjusted (aged 16 to 64)

Source: Labour Force Survey - Office for National Statistics

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Unemployment

The gross inflow to unemployment (chart 1) increased slightly in the latest quarter but has shown little change over the past year, staying close to 900,000 per quarter.

Chart 1: Inflow to Unemployment, thousands of people seasonally adjusted (aged 16 to 64)

Source: Labour Force Survey - Office for National Statistics

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The gross outflow from unemployment (chart 2) has remained fairly stable over the last year at just below 1 million per quarter.

Chart 2: Outflow from Unemployment, thousands of people seasonally adjusted (aged 16 to 64)

Source: Labour Force Survey - Office for National Statistics

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Chart 3 shows the net flow remained negative in the latest quarter and slightly lower than the quarterly change in stock. 

Chart 3: Unemployment Net Flow, thousands of people seasonally adjusted (aged 16 to 64)

Source: Labour Force Survey - Office for National Statistics

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Employment

The gross inflow to employment (chart 4) decreased slightly in the latest quarter but continued to be more than 1 million per quarter. The inflow from inactivity decreased slightly in the latest quarter.

Chart 4: Inflow to Employment, thousands of people seasonally adjusted (aged 16 to 64)

Source: Labour Force Survey - Office for National Statistics

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The gross outflow from employment (chart 5) was unchanged in the latest quarter after having been on a decreasing trend over the previous year.

Chart 5: Outflow from Employment, thousands of people seasonally adjusted (aged 16 to 64)

Source: Labour Force Survey - Office for National Statistics

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The net flow for employment (chart 6) remained strongly positive in quarter 4 2012.

Chart 6: Employment Net Flow, thousands of people seasonally adjusted (aged 16 to 64)

Source: Labour Force Survey - Office for National Statistics

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Inactivity

The gross inflow to inactivity (chart 7) decreased in the latest quarter due to slightly lower inflows from both employment and unemployment.

Chart 7: Inflow to Inactivity, thousands of people seasonally adjusted (aged 16 to 64)

Source: Labour Force Survey - Office for National Statistics

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The total outflow from inactivity (chart 8) decreased slightly in the latest quarter, mainly reflecting a slight fall in the outflow to employment.

Chart 8: Outflow from Inactivity, thousands of people seasonally adjusted (aged 16 to 64)

Source: Labour Force Survey - Office for National Statistics

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Chart 9 indicates that the net flow in quarter 4 2012 remained negative and lower than the quarterly change in stock.

Chart 9: Inactivity Net Flow, thousands of people seasonally adjusted (aged 16 to 64)

Source: Labour Force Survey - Office for National Statistics

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Technical Note

There are differences between the data used for the published LFS aggregate estimates and the longitudinal data used to estimate the gross flows:

1. Flows are currently adjusted for non-response bias through special calibration weights in the longitudinal datasets. These aim to account for the propensity of certain types of people to drop out of the LFS between one quarter and the next. For example, housing tenure features in the weighting of the longitudinal data because, historically, households in rented accommodation have been more likely to drop out of the survey than owner-occupiers.

2. There is some evidence that the longitudinal datasets are affected slightly by response error which causes a slight upward bias in the estimates of the gross flows. For example, if it was erroneously reported that someone had moved from unemployment to employment then, in addition to the outflow from unemployment being overestimated, so would the inflow to employment. In the main quarterly LFS dataset, any such misreporting errors tend to cancel each other out.

3. The differences in the net flows for inactivity shown in Chart 9 are mainly the result of excluding the entrants to, and leavers from, the population in the flows estimates contained in this piece of analysis. This effect is normally one that increases the number of people who enter inactivity. This is because the increase in inactivity from those people turning 16 is greater than those leaving inactivity due to becoming 65.

4. The stocks derived from the longitudinal datasets differ from those obtained from the quarterly LFS datasets due to their being based on a subset of the main LFS sample. The restriction to measuring only those who are commonly aged 16-64 across successive quarters discounts those entering or leaving the population and also those over 64. All such people are accounted for in the headline LFS aggregates.

Background notes

1. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

References

1. Labour market gross flows data from the Labour Force Survey (145.4 Kb Pdf)  investigates the use of longitudinal datasets from the Labour Force Survey as a tool for assessing the UK labour market.

2. Approaches to the seasonal adjustment of labour market flows (174.8 Kb Pdf)  explains the methodology behind the seasonally adjusted flows estimates which were published for the first time in November 2012.