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Where will the new jobs come from?

This is a question posed by Dr John Philpott, chief economic adviser to the Chartered Institute of Personnel and Development (CIPD). The reason he asks it is because he believes that: “The full impact of the coalition government’s planned fiscal tightening has been understated.”

The government’s estimate is that nearly 500,000 jobs will be lost in the public sector over the next four years. They expect that growth in the private sector will mop up the additional unemployment which is forecast.

However, the CIPD believe that the private sector will suffer even more than the public sector. In fact, they argue that an average of 320,000 private sector jobs each year will have to be created to keep unemployment at its current level of 2.5 million by 2015-16.

Job losses could be well above government forecasts.


The CIPD believes that the number of jobs lost in the private sector as a result of cuts in government spending will reach 650,000, and an additional 250,000 will be lost due to the increase in VAT to 20% at the start of next year.

On top of this, they believe that the government estimate of half a million lost jobs in the public sector will turn out to be more like 725,000 between the last financial year and 2015-16.

All in all, they see a worsening in unemployment levels, over this period, of just over 1.5 million.

The Treasury responded by pointing out that the new, independent Office for Budget Responsibility sees continuing economic growth in the years ahead, such that employment will rise and unemployment will fall. On the other hand, the CIPD agrees that the private sector could create more than 300,000 jobs a year, but only if there is average growth of 2.5% per year in the UK economy.

It would be nice to think that we would see growth levels of this average magnitude, but many commentators are still wondering whether we will slip back into recession or not. It is not looking good.

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Posted in Employment, Public Finances, unemployment

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