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Why The Jobs Crisis Isn't A Disaster - Yet

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http://www.telegraph.co.uk/finance/comment...ster---yet.html

To rework a well-worn phrase, you can see signs of economic recovery everywhere except in the labour market statistics.

Official figures released last week show UK unemployment at a 14-year high of almost 2.5m, with most forecasters expecting the jobless total to reach at least 3m next year. Yet, while it will be of little comfort to people desperate for work, the situation could be a lot worse.

Just as we were digesting the latest UK jobs figures, the Organisation for Economic Co-operation and Development (OECD) published its annual Employment Outlook, noting that unemployment in this country has so far risen by no more than the OECD average. This is in marked contrast to economies such as Spain, Ireland and the US, which have experienced larger-scale job losses from a similar scale of financial sector and housing-market collapse.

The Bank of England has also highlighted that the percentage fall in employment during the recession has been only around a third as large as the percentage contraction in the economy. This represents a much lower "job distress ratio" than suffered in the recessions of the 1980s and 1990s. Had previous UK experience been repeated it is likely that roughly half a million more jobs would have been lost.

This outcome in part reflects the impact of the Government's fiscal stimulus, which has boosted public-sector employment as well as buttressing overall spending power in the economy. But even more significantly, compared with previous recessions the pain of labour-market adjustment has been shared more evenly across the workforce in the form of reduced hours and pay cuts rather than falling entirely on job losses. As a result, the unemployment fall-out from Britain's worst recession since the 1930s is likely to be less dire than initially feared.

Unfortunately, this doesn't necessarily mean a rosier outlook for jobs. Whatever kind of return to growth we experience, things will get worse before they get better. As the truism goes, unemployment is a lagging indicator of economic recovery.

Employers who detect a pick-up in business will at first respond by getting their existing staff to work longer hours and only start to hire extra staff once it is clear they are needed. The fact that more employers have cut hours or pay rates in order to keep hold of staff during the recession could lengthen this lag.

So don't expect to see unemployment peak until the spring of 2010, at the very earliest. And even then it's unlikely that the dole queue will get much shorter very quickly given the high probability of a "jobs-light" recovery.

Employment growth is nowadays overwhelmingly driven by the strength of demand for services. This will remain muted in an economy of heavily indebted consumers, credit-constrained businesses, and a government sector looking to cut costs. The best we can hope for is a sustained export-led economic recovery. But this suggests a very gradual increase in job creation with little prospect of a return to the pre-recession rate of unemployment before 2015.

Most worrying of all, we can't yet rule out an anaemic or fragile "job-loss" recovery. This would see a higher peak in joblessness and an even slower grind back to full employment. While this risk remains it is far too soon to withdraw the fiscal and monetary stimulus that has helped prevent the current jobs crisis from becoming a disaster.

Considering that there is likely to be 20% in public spending unemployment is going to get a lot worse. Not mentioned in the article is the fact a lot of former highly paid people are probably living off savings and/or married/partner is still earning and they can make ends meet without the need for claiming.

I still expect around 3m by the end of 2009, if savings run out for the highly paid middle managers etc.... we could see a large boost in the numbers claiming unemployment benefit in 2010.

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Guest Steve Cook
http://www.telegraph.co.uk/finance/comment...ster---yet.html

Considering that there is likely to be 20% in public spending unemployment is going to get a lot worse. Not mentioned in the article is the fact a lot of former highly paid people are probably living off savings and/or married/partner is still earning and they can make ends meet without the need for claiming.

I still expect around 3m by the end of 2009, if savings run out for the highly paid middle managers etc.... we could see a large boost in the numbers claiming unemployment benefit in 2010.

Yep

Also, has anyone noticed the significant rise in the use of the term "dole scroungers" lately?

They are culturally preparing us for the wall of unemployment to hit.

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Guest P-Diddly
The unemployment figures are meaningless.

Given there are 2.7 million people on incapacity benefit we are probably way over 5 million now.

Pluso Uno!!!

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