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Sharp rise in UK unemployment

Recovery, what recovery? Unemployment rose by 80,000 to 2.51 million in the three months to July, according to figures released this morning by the Office for National Statistics. This means that the jobless rate now stands at 7.9%. The so-called Claimant Count – those claiming Jobseeker’s Allowance, rose by 20,300 in August to reach 1.58 million. There was also a sharp rise in youth unemployment by 78,000 in the three months to July, with the total now standing at 973,000.

Bad news all round so far this week

We all know that public sector employment is to be hit hard by government cutbacks, and that the government is relying on the private sector to take up the slack. But then the government also believes in Santa Claus. The latest figures show that over the three months to July, public sector employment fell by 110,000 whilst private sector employment rose by 41,000. So, that idea is not working, both literally as well as metaphorically.

Yesterday brought the news that inflation has continued to rise, with the CPI rising to 4.5% in August, from 4.4% in July. The RPI figure rose from 5.0% to 5.2%, and it is widely believed that the CPI figure will hit 5.0% by the end of the year. However, inflation should start to fall in the new year when the effect of earlier VAT rises and energy and oil price rises start to unwind.

But, we need to distinguish between price levels and the rate of increase in prices. The level of prices we are suffering at the moment is not going to fall; it is just the rate of increase in prices which is going to slow down. Average earnings, including bonuses, for those lucky enough to have a job, rose by 2.8% in the three months to July. But this is still well below inflation, which means that real incomes are continuing to fall.

Our trade in goods deficit in July widened slightly to £8.92bn when the general consensus was that it would fall. So there will be no salvation for the economy from improved trade, or consumer expenditure, or government expenditure, and we can expect the third quarter growth figures to be flat.

On top of this, composite leading indicators (CLIs) for July 2011, designed to anticipate turning points in economic activity relative to trend, continue to point to a slowdown in economic activity in most OECD countries and major non-member economies, according to figures published this week by the OECD. The CLI for the OECD area as a whole, fell 0.5 points in July; the fourth consecutive monthly decline.

Compared to last month’s assessment, the CLIs for Canada, France, Germany, Italy, the United Kingdom, Brazil, China and India are pointing more strongly to a slowdown in economic activity.  The CLIs for the United States and Russia are now also pointing more clearly to a slowdown in economic activity than in last month’s assessment.

The global economy is in a perilous state at the moment.

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Posted in Balance of Trade, Inflation, UK economy, unemployment

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