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Unemployment – the lull before the storm

Good news on the unemployment front – or is it? Latest figures from the ONS today show that in the three months to August 2010 the number of unemployed fell by 20,000, to reach 2.45 million. This gives an unemployment rate of 7.7%, which is down 0.1% over the quarter. Male unemployment fell by 56,000 on the quarter, but female unemployment rose by 36,000. So, not good news if you are female.

But, the number of people claiming Jobseeker’s Allowance (the claimant count) actually increased by 5,300 between August and September to reach 1.47 million. This was the second consecutive monthly increase in this measure of unemployment. The increase was mainly due to a rise of 4,200 in the number of female claimants.

As far as employment is concerned, this rose by 178,000 in the three months to August to reach 29.16 million. This gave an employment rate for those aged 16 to 64 of 70.7%, up 0.2% on the quarter. So good news – or is it?

Source: ONS

One of the big problems is that although there are more people in work, they are not working as much as they want to. There are currently 7.96 million people working on a part-time basis, but according to official figures, no less that 1.14 million people don’t want to work part-time. They are just unable to obtain a full-time job.

Unfortunately, this is going to get worse. The number of vacancies for the three months to September fell by 30,000 on the quarter, to 459,000. So there are going to be fewer jobs available, and many of these are going to be of the wrong sort, in that they will only offer part-time work. On top of this the government budget cutbacks are going to make things even more depressing for job seekers.

An analysis by consultants PricewaterhouseCoopers (PwC) just published, says that in certain parts of the UK, 5% of people are going to lose their jobs over the next four years. This is based on the public spending cuts which the Chancellor is soon to announce.

They believe that the government’s austerity measures will result in a fall of £46bn in private sector output, which is equivalent to 2% of all private sector output.

PwC’s forecast suggests that the private sector will only create about 1 million jobs over the four year period, which is far less than the 1.6 million which had been suggested by the Office for Budget Responsibility.

According to John Hawkesworth, PwC’s chief economist, rising taxes and a weaker international trading environment would “dampen down growth significantly.”

So, great news all round. It is now confirmed that as government cuts back spending, this will reduce private sector output and not increase it. There was an interesting article on the BBC website this morning showing how cuts in government school building are having downward multiplier effects on businesses in the Coventry area.

Also, the government’s policy over recent years which encouraged the relocation of public sector employment to the regions is now going to hammer those regions, as they bear the brunt of public sector employment. That is why PwC is suggesting that percentage job losses will be much higher in Northern Ireland, Wales, Scotland and the north-east than elsewhere in the country. It will take more than prozac to get us out of this one.

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Posted in Employment, government spending, unemployment

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