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A curious thing is likely to happen next week: Donald Trump may well be handed positive headlines as a result of record-high immigration. Perhaps more curious still, a similar phenomenon in the UK is instead giving Keir Starmer and Rachel Reeves a headache.
In both cases, the narrative is being shaped by how labour market statistics deal with the revelation that the population is larger than was previously realised. But this plays out in different ways on the two sides of the Atlantic.
Last quarter, Britain’s Office for National Statistics revised upward its estimates of net immigration during the two years ending in December 2023, calculating that around 300,000 more people than initially thought arrived and stayed in the UK, a 20 per cent bump. This increase, as well as some of the updated assumptions beneath the surface, fed into revised population projections published earlier this week.
If that sounds like a big adjustment, the US Census Bureau then increased its estimates of net immigration for 2022 and 2023 by almost 90 per cent, from 2.1mn to 4mn, adding another 2.8mn for 2024. As a result, US population growth last year is now thought to have been the fastest in decades.
To be clear: the fact that these revisions happen is a good thing. In both cases, the way immigration is counted is improving, aided in large part by the incorporation of administrative data, which is more accurate and timely than survey-based sources. At any rate, it’s far better to have revisions and more accurate numbers, than no revisions and still the wrong numbers.
But substantial shifts like these don’t just change what we thought we knew about population size and growth rates. They influence economic indicators too, not least labour market statistics.
Next Friday’s monthly US jobs report, the first of Trump’s second term, will incorporate a raft of revisions to the underlying survey data, among them the dramatic upward adjustment to the population size.
Analyses from the Brookings Institution and Jed Kolko, formerly a senior economist under Joe Biden, indicate that, contrary to reports last year, the new figures will probably show that native-born Americans are not losing out in the job market relative to immigrants. In fact, US-born employment is growing.
The old, erroneously low population figures artificially lowered estimated employment levels derived from America’s main household economic survey, causing US-born employment to appear to be falling. In reality, population growth was so high that even though the native-born share had fallen, the native-born number still rose.
Across the Atlantic, similar revisions have a very different impact. Well-publicised problems with Britain’s labour force survey mean the UK increasingly leans on administrative data to take the temperature of the labour market. And that shows that the number of working-age payrolled employees flatlined for most of last year, before dipping.
Crucially, because these figures are counts based on tax records, not proportions derived from surveys, unexpectedly high population numbers only grow the denominator in the employment rate, not both sides of the equation as in the US. As a result, stagnant UK job numbers translate into a marked deterioration in labour market conditions when viewed against the backdrop of robust immigration-driven population growth.
The number of working-age UK employees is down 0.2 percentage points year-on-year, but expressed as a proportion of the population the dip is almost a full percentage point — the deepest since 2008, pandemic aside. Where the rapid labour market loosening of 2008 was mainly driven by a shrinking numerator (job losses), this one comes primarily from an expanding denominator (jobless arrivals).
The depth of this downturn is probably a lower bound, since some recent arrivals may be self-employed or in other types of employment that the UK’s tax-based job figures struggles to capture. But the general picture of population growth outpacing job growth is clear.
While statistics like the numbers of people and workers in the country might feel solid, the array of revisions and methodological differences highlight the flimsy nature of many narratives that form around them. The picture gets more accurate over time, but there will be blurry moments along the way.
