Nearly 1m workers in job market have been 'lost' due to unreliable official data

Nearly a million workers in the UK's job market have been "lost" due to inaccurate and unreliable official data, leading to potential overestimations of unemployment and inactivity rates, according to claims by a think tank.

The Resolution Foundation has accused the Office for National Statistics (ONS) of misrepresenting trends in the job sector through its Labour Force Survey (LFS), which they argue has underestimated employment growth by 930,000 workers since 2019.

The ONS has previously expressed concerns about the accuracy of its main LFS data due to poor survey response rates since the pandemic began, causing economists to become increasingly sceptical about the statistics. The Resolution Foundation has developed its own alternative estimate of UK employment, using HM Revenue and Customs payroll and self-employment data, as well as the latest ONS population data.

They suggest that the actual employment rate could be around 76%, rather than the official rate of approximately 75% reported by the ONS. This could also impact the current estimated unemployment rate of 4.3% for the third quarter, as well as the level of workforce inactivity, which ONS data shows has been on the rise in recent years.

Adam Corlett, principal economist at the Resolution Foundation, criticised official readings of the labour market: "Official statistics have misrepresented what has happened in the UK labour market since the pandemic, and left policymakers in the dark by painting an overly pessimistic picture of our labour market.

"The ONS Labour Force Survey appears to have ‘lost’ almost a million workers over the past few years compared to better sources. This has led to official data underestimating people’s chances of having a job, overstating the scale of Britain’s economic inactivity challenge, and likely overestimating productivity growth."

The Resolution Foundation warned that this could make achieving government ambitions more challenging: "The Government’s target to reach an 80% employment rate will be marred by poor-quality data", hindering the crafting of effective policies.

The organisation pointed out issues with the ONS Labour Force Survey's (LFS) methodology: It claims that the response rate to the ONS’s jobs survey has slumped to just 13% from 39% between 2019 and 2023. The decline indicates that some population groups are less likely to respond, and there are difficulties capturing the rise of workers from outside the .

The ONS said it was aware of issues with the LFS data and has been placing more weight on other statistics, such as the more timely payroll data from HMRC. It also stressed that recent improvements to increase response rates have seen the number of interviews carried out rise from 44,238 to 59,139.

An ONS spokesperson stated: "We have been clear for some time that we believe the trends in employees produced from the HMRC tax information and our own separate survey of employers are likely to be painting a more accurate picture than that currently presented by the LFS.

"Our ongoing work to improve the LFS estimates by increasing the sample, reintroducing face-to-face interviews, increasing incentives for those taking part and reweighting the data using the latest population information will all help to improve the quality of the survey."

The ONS added that it was collaborating with external experts to determine if any additional measures were necessary. This announcement coincides with the Resolution Foundation's appointment of Ruth Curtice, former Treasury director of policy, as its new chief executive, effective January 20.