There has been a huge rise in self-employment in the three months to October 2011, which is not explained in the latest labour market statistics release from the ONS. The total number of people in employment fell by 63,000 in the three months to October but this fall disguised some major labour market changes in the background.

The total number of employees fell by 252,000 over the quarter to reach 24.77 million, but this was offset by a huge increase in the number of self-employed people which increased by 166,000 on the quarter to 4.14 million. This is the highest number of self-employed people since records began in 1992. The number of unemployed people was 2.64 million on the ILO measure, up 128,000 on the quarter. This is the highest number since 1994.

The massive growth in self-employment raises some big questions. In the recession period of 2009 unemployment did not rise as high as many forecast because many people made redundant found jobs, albeit at less favourable terms and often part-time rather than full-time.

In 2011 people made redundant are not finding jobs open to them so are registering as self-employed, even though many in reality will have little employment. This rise in self-employment is flattering the unemployment figures, which is not a pleasant thought.

Meanwhile, the latest average earnings (AWE) figures show private sector earnings dropping back to 2.1 per cent in October, down from 2.4 per cent in September and 2.9 per cent in August. Total pay growth in the private sector, including bonuses, had risen to 2.9 per cent in June staying there for three months, but the weakening economy has brought weaker earnings growth.

The whole economy average earnings figures stood at 2.0 per cent in the year to October. While the pay growth in the private sector was 2.1 per cent, in the public sector it was 1.7 per cent. Over the summer quarter earnings growth in the private sector, at 2.9 per cent, had been twice as high as the public sector, at 1.5 per cent.

Earnings growth in the finance and business services sector is still the strongest in the economy, with an annual rate of growth in October of 3.3 per cent, down from 4.3 per cent in September and 5.8 per cent in August. The higher rates of growth in finance seen in the spring and summer are easing back from their peak at 6.8 per cent, which reflected higher-paid employees getting large rises.

In the largest sub-sector of the economy – covering wholesale, retail, hotels and restaurants (with 23 per cent of all employees) – earnings growth in the year to October (on the less reliable single month measure) was 2.2 per cent. The sub-sector has the bulk of those lower paid employees affected by the National Minimum Wage which rose by 2.5 per cent in October. This year the impact of the increase in the minimum wage is quite noticeable whereas in October 2010 it was not. Average weekly earnings in the sector rose by £2 between September and October from £299 to £301.

Elsewhere in the private sector, average weekly earnings slipped back further in manufacturing to 1.4 per cent in October, down from 1.6 per cent in September. A year ago the rate of growth in October 2010 was 4 per cent.

Earnings in construction continued to buck the trend, having been negative for much of the year up to June 2011. Since then there has been modest growth of 2.2 per cent in each of the three months to October 2011.