• UK unemployment triples from 3.7% to 12.1% when including 3 million economically inactive people.
• Nine of 10 cities and towns with the highest hidden unemployment rates are in the North.
• Government should deliver levelling up agenda to boost skills and support job creation in struggling urban areas.

The UK’s record-low unemployment figures do not include a hidden army of more than three million working-aged people that are involuntarily economically inactive, according to Cities Outlook – Centre for Cities’ annual economic assessment of the UK’s largest urban areas.

While official figures show the country’s jobseeker rate at 3.7 per cent, the actual ‘hidden’ unemployment rate is more than three times higher at 12.1 per cent. This is because the official rate only measures those who are actively looking for employment and does not include people who are neither in work nor looking for a job due to circumstances outside of their control.

The hidden unemployment rate also clearly shows how the ongoing inactivity crisis is deepening regional divides across the country, further highlighting the need for the Government to deliver the levelling up agenda, boost skills, and support job creation.
Of the ten places with the highest hidden unemployment rates, nine are in the North of England, with one in Wales. Meanwhile eight of the ten urban areas with the lowest rates are in the South.

Cities and towns with the top 10 and bottom 10 hidden unemployment rates

Source: ONS. The hidden unemployment rate is calculated by adding involuntary activity to official unemployment figures.

In Blackburn and Middlesbrough, involuntary inactivity figures push the total unemployment rate up from just under 6 per cent to more than 20 per cent. This strongly contrasts to cities like Gloucester and Reading where the hidden unemployment rate is around 8 per cent.

Recent discussions on addressing economic inactivity have tended to be framed as a challenge of improving public health and bringing people back to the jobs market to fill open vacancies.

While there is a clear North-South divide in the number of people out of work due to long-term sickness, Cities Outlook shows that addressing this issue alone would not be enough to resolve the UK’s inactivity crisis.

The bigger challenge many urban areas face is in fact a long-term jobs shortage problem, rather than a short-term lack of workers.

Overall, cities in the North and Wales are more likely to face a job shortage: they account for 16 per cent of job postings, but 21 per cent of hidden unemployment. It’s the opposite relationship in cities elsewhere in the country, which account for 46 per cent of job postings but 37 per cent of hidden unemployment.

And as the below tables show, the cities with the highest hidden unemployment rates also have higher proportions of unskilled workers but significantly lower proportions of high-skilled jobs.

Source: ONS

For example, in Blackburn, 9 per cent of the population has low skills and just 9.7 per cent of jobs are in well-paying knowledge-intensive sectors, while in Reading those figures are 3.9 per cent and 28.4 per cent, respectively.

If policy is to tackle the UK’s true inactivity problem, then it will need to address the shortage of jobs in struggling cities and large towns. The Government should therefore swiftly set out a levelling up agenda that tackles the reasons for why there is a lack of jobs and skills in urban areas outside the Greater South East.

“Since the pandemic we have seen lots of headlines alluding to record-low numbers of job seekers but Cities Outlook shows that in many cities, particularly in the North, there is actually a jobs shortage.

With the UK predicted to enter a recession, the Government must address its lack of action on levelling up so far and act swiftly to create more opportunities to get people back into the labour force.

This will require implementing an agenda that delivers much-needed investments in skills and public services, while supporting job creation in struggling places.”

Andrew Carter, Chief Executive, Centre for Cities 

Notes to editors

Involuntary inactivity and hidden unemployment defined

The involuntary inactivity rate is calculated by discounting students, retirees and people looking after family from total inactivity figures. People in the involuntary inactivity category may leave the labour market and stop looking for a job if they are discouraged, believe there are no jobs (or no good jobs) available, or cannot work because of health issues.

Hidden unemployment is calculated by adding involuntary inactivity to official unemployment figures.