The latest unemployment figures have delivered a relatively pleasant surprise, indicating that unemployment stalled at 7.8% in November 2009. The UK’s rate of unemployment is a lot less than many people anticipated given the depth and length of the recession, particularly when compared to unemployment rates of 10% in both Europe and the US.

The business editor of the Times, David Wighton, warns that this comparatively low employment rate may be masking a serious issue which could still threaten the economy: the problem of under-employment.

According to Wighton, data from the Office from National Statistics (ONS) shows that one of the defining features of this recession has been under-employment, where workers have agreed to a cut in hours to keep their job or have lost a full-time position but quickly found part-time work instead.

Using the ONS data, Wighton puts the under-employment - defined as people who would like to work more hours than they currently do - at roughly 10%, whereas before the recession the rate was around 8%.

So, while unemployment growth has been held in check by the new collaborative spirit in the workplace, with employers and employees working together to install anti-redundancy measures such as taking shorter hours and pay freezes, the under-employment figures show that this is clearly not an ideal solution to the problems caused by the recession.

As Wighton explains: “Under-employment is not a ‘get out of jail free’ card for the economy. Shorter hours and pay freezes mean modest pay packets, and modest pay packets coupled with debt-laden households do not bode well for consumer demand … Under-employment is here to stay.”

Technorati Tags: Recession, Under-Employment, Unemployment