Wednesday, 18 January 2012

Unemployment and its consensus economics

Figures out today show unemployment has risen again over the last quarter by 118,000 to an 18 year high of 2.69 million. The unemployment rate is now 8.4%.

But even these grim figures don't tell the full horror: if you add those who are working part-time who want full-time work, and those in temporary jobs who want permanent work, it means 4.6m are looking for work.

Sadly the number of vacancies in the economy has declined by 18,000 over the last year to just 463,000: this means there are, on average, ten people chasing every job.

For young people, the picture is even more grim: youth unemployment rose to 22.3% - a new record high. The number of 16 and 17 year olds out of work hit a staggering 38.4%, while nearly a quarter of a million 16-24 year olds have been unemployed for over a year.

This is an absolute condemnation, proof beyond reasonable doubt, that austerity is failing - and yet Ed Balls and Ed Miliband have just embraced it. The latter embarrassed as David Cameron quoted the former back him, "we’re going to have to keep all these cuts" at Prime Minister's Questions.

Now, you might make all sorts of arguments about the Eurozone, unseasonal weather, or that rioters have scared away shoppers, but the data doesn't lie. If the above isn't proof enough, consider this: in the past year UK unemployment has risen by 0.5%, Eurozone unemployment by 0.3%.

This is coming from George Osborne's homegrown economic disaster: in the last quarter there were 67,000 public sector job losses, compared with only 5,000 created in the private sector (four times as big). That is having a disproportionate impact on women, for whom unemployment has shot up by over 20% in the last year.

Despite allegedly ringfencing health and education, in the last quarter alone 8,000 jobs have been lost in the NHS and 30,000 in education - the majority of whom will have been women.

Pay restraint is also having its effect: with the average pay increase just 1.9% over the last year, while inflation is at 4.8%. Osborne's pay freeze, to be followed by pay restraint at a maximum of 1% is now endorsed by Ed Balls.

Yet Balls-the-credible said at the weekend, "There is no way we should be arguing for higher pay". Really Ed? And this man was considered the economics brains behind Gordon Brown.

That pay restraint is having a knock-on effect on the private sector because it is hitting disposable incomes. It also explains why people are increasingly falling into arrears and defaulting on loans and mortgages.

Austerity isn't working. The cuts are wrong and need to be opposed and reversed or we will have entered a death spiral a la Greece by 2015.

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