Last month the Office for National Statistics (ONS) published an article discussing the current challenges being faced in the Labour Force Survey (LFS), and what steps they are taking to address this. Today, we are discussing how these issues impact labour market statistics for Wales, and the approach we are taking to continue providing a robust and timely picture of the Welsh labour market.
Darllenwch y dudalen hon yn Cymraeg.
Measuring the labour market
The LFS is a large sample survey and the primary data source for labour market headline indicators (employment, unemployment and economic inactivity) across the UK countries and English regions. This survey asks a sample of thousands of people in Wales questions on a variety of labour market topics, crucially including information on both those working and not working. This is different to other labour market data sources such as Workforce jobs (ONS) and HMRC’s Pay As You Earn (PAYE) Real Time Information (RTI) data (ONS).
The size and regularity of the LFS – with updates published each month – makes it the primary and most timely data source on the labour market for Wales.
Labour Force Survey challenges and impacts
In recent periods, the sample size of the LFS has decreased due to challenges in maintaining response rates. For Wales, this has resulted in a reduction in the robustness and reliability of the data. Sampling variability has increased, confidence intervals have widened, and headline numbers and trends have diverged from other key labour market data sources.
In response to the COVID-19 pandemic, ONS increased the issued sample size for the LFS to mitigate the drop in response rates. In July 2023, ONS reverted to pre-pandemic sample sizes which may cause further challenges as outlined above, as this will potentially have an impact on response numbers and sampling variability. The full impact of this change won’t be apparent until a full quarter of data is available which will be published in November 2023.
Due to the increased volatility and widening confidence intervals, as shown in figures 1 and 2, it is difficult to state whether quarterly and annual changes in the data are an actual reflection of changes in the Welsh labour market, or solely the impact of the smaller achieved sample.
Figure 1: LFS employment rate and confidence intervals for Wales, three months to June 2021 to the three months to June 2023
Description of Figure 1: A chart showing LFS employment rate values and corresponding confidence intervals for Wales. The employment rate has generally decreased over the last year alongside increases in the confidence intervals.
Figure 2: LFS unemployment rate and confidence intervals for Wales, three months to June 2021 to the three months to June 2023
Description of Figure 2: A chart showing LFS unemployment rate values and corresponding confidence intervals in Wales. The unemployment rate and the corresponding confidence intervals have both increased over recent periods.
The uncertainty of LFS estimates are also evident when comparing the LFS to other data sources. LFS employment numbers and trends for Wales have diverged from HMRC RTI data over recent periods, as shown in figures 3 and 4.
Figure 3: LFS employment trends for Wales and the UK, three months to June 2019 to the three months to June 2023 (2019-20 = 100)
Description of Figure 3: A chart showing LFS employment levels for Wales and the UK, indexed to 2019-20. The estimated employment levels of the LFS data has shown a negative trend over recent periods.
Figure 4: HMRC RTI employee trends for Wales and the UK, three months to June 2019 to the three months to June 2023 (2019-20 = 100)
Description of Figure 4: A chart showing HMRC RTI employee levels for Wales and the UK, indexed to 2019-20. The estimated employee levels of the HMRC RTI data has shown a positive trend over recent periods.
It is worth noting, figures 3 and 4 show slightly different measures of employment, with HMRC RTI data only including employees and LFS data including those who are self-employed (which has been falling over the pandemic and post-pandemic period at the UK level). The two sources have diverged in recent periods and while the decrease in self-employed may explain a small part of this, the diverging trends are still cause for concern.
The combination of volatile data, widening confidence intervals and diverging trends between data sources has challenged the quality of the more recent LFS estimates, raising the question: how do we mitigate the impact of these issues and maintain a clearer picture of the Welsh labour market?
Providing a clearer picture of the Welsh labour market
ONS are in the process of developing the Transformed Labour Force Survey (TLFS), which aims to improve response rates and quality of estimates through a number of changes to the design and processes adopted for the survey, including asking more people and introducing new collection methods. The first figures from the TLFS are due to be published next spring.
In the meantime however, figures from the LFS remain volatile for Wales, providing an uncertain view of the labour market when viewed in isolation. It is therefore important to take account of information from a range of sources. The LFS represents the primary data source, but in advance of the transformed version next spring, it is recommended that greater consideration should be given to the trends exhibited by other sources. Evidence from the Annual Population Survey (APS), HMRC RTI, Workforce Jobs, and claimant count series suggests that the labour market in Wales has followed similar trends to the UK as a whole since the pandemic.
Our Labour Market Overview bulletin will continue to draw from an array of relevant labour market data sources, providing a timely and comprehensive picture of the Welsh labour market each month.
Stephanie Howarth
Chief Statistician