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Financial Crisis To Leave 'permanent Scar' On Unemployment, Warns Niesr

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Structural unemployment will settle at 6.2pc, the respected think-tank said, compared with 5.25pc before the crisis. An increase of that size would put 300,000 more people permanently on the dole.

"This is a permanent scar caused by the financial crisis, as the economy has shifted to a lower equilibrium," Simon Kirby, NIESR's UK economist, said. A country's structural unemployment level is its "full employment" rate – when the number of jobless cannot shrink further without forcing inflation above target.

NIESR's estimate follows an even worse picture from the International Monetary Fund (IMF), which has estimated that Britain's structural unemployment level has risen to 6.8pc. At that level, the UK would have 2m permanently unemployed.

Despite the bleak outlook, NIESR reckons unemployment will peak at just 8.3pc next year – lower than its April forecast for 8.7pc as companies continue to "hoard" labour rather than slash jobs. The figure is well short of the 10pc experienced in the last two recessions. Official statistics currently have unemployment at 7.7pc, or 2.45m.

How many of those being hoarded have had their hours cut?

I think they mean without forcing wage inflation above target or are they suggesting unemployment isn't high enough at present to bring inflation down?

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  • 338 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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