The latest unemployment figures reveal that in the last quarter the UK experienced the highest growth in the number of people in work since 1997.

At the same time the number of people claiming unemployment benefit in December 2007 fell for the 15th month in a row and now stands at 807,700, the lowest for 30 years.

It appears a remarkable performance: an economy that has clearly skidded to a halt over the past three months not only creating more jobs than it has lost, but creating them in sufficient quantity to suck up the long-term unemployed.

An economy in perpetual forward motion!

Too good to be true?

Of course, but in order to make sense of these claims one needs three sets of figures: the employment figures, the claimant figures and, crucially, the figures for public sector employment.

The latest figures show that employment is now a record 29.36 million, up 175,000 in the last three months, while claimants stood at 807,700, down some 70,000 since May 2007.

Unfortunately, the claimant count is not as rosy as it might seem. It is true that the number claiming Job Seekers Allowance (JSA) has fallen – as the figures suggest – but this does not take into account any changes to the 3.5 million on various forms of out-ofwork benefit (incapacity benefit, etc). These figures – due to methodology – are conveniently not available until next month and are then generally buried in the bowels of the next set of statistics.

So it is quite possible that the fall in the number of claimants could simply be due to those on JSA transferring across to other forms of benefit. A major fall in unemployment, without the creation of a single job.

However, economists would argue that the number of people in work, rather than the number claiming benefit, is a more accurate indicator of the health of the economy.

Therefore, setting aside the fact that the job figures indicate that there are some 10 million economically inactive people in the country, a huge drain on resources even if this figure does include students, it is sensible to ask where all these “new” jobs have come from.

The Office of National Statistics (ONS) says there are now some 5.8 million people working in the public sector: a frightening figure, but not really relevant to the central question as the figure is much the same as it was last year and slightly lower than the year before.

As the public sector has not grown, it follows that the private sector must be supplying these new jobs, some 263,000 over the past year. But how can that be when the economy is slowing?

It is all down to the way we count new jobs. The public sector, for reasons best known to itself, takes into account only those employees who are paid directly by the public sector employer – in short, it does not count staff from agencies or outside contractors – even if those staff are full-time workers with a particular public body.

This may not have seemed important at the time when the counting rules were drawn up, but it is now because one of the central planks of Government policy over the past two years has been to outsource work.

The ONS reckons (and public sector union Unison agrees) that there are now 1.8 million agency workers in the UK, 40 per cent of them working for the public sector. That is 720,000 public sector jobs created over the last few years which are not counted as public sector jobs, but, in fact, as jobs created by the private sector.

It is probable, given the economic cycle, that the fall in unemployment is largely down to people swapping to other benefits, and the rise in private sector job creation is entirely down to the public sector.

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