The unemployment figures on the ILO measure fell by 49,000, largely due to a fall in youth unemployment. This really is good news as it means that the jobs market at the bottom end may be recruiting again. If school and university leavers had to endure another year of poor recruitment then then problems of long term, but young unemployed would present a massive policy problem for a decade at least.
Unusually the claimant count measure of unemployment rose. This difference is unusual because it is harder to get Job Seekers Allowance than it is to say you are unemployed according to the ILO definition. However we should wait for more data before reading too much into this.
Meanwhile the Bank of England said that the growth of the economy will be much slower than they thought in their last report, just three months ago. They now think the economy will return to 2008 levels of output in 2015 and not 2013. That is really quite a big difference.
The bank expects recovery to be uneven and does not rule out future declines in output in some quarters. The Euro area recovery is key. If Europe does not recover, and today it was announced that the Euro area slipped back into recession, then Britain will suffer too.
It is great news that employers are doing all they can to give people employment, but unemployment is still extremely high and has still risen substantially - long-term unemployment and youth unemployment is still a major worry seen as they are too high. What is worse is that now the Chancellor is going to push forward some extra spending cuts, unemployment is very likely to start rising again. The Government should be radical when it comes to tackling unemployment so unemployment could continue falling dramatically. They could provide universal free childcare so more mums can get back into work, have a Jobs Guarantee whereby you can only be on JSA for a year and then the Government will provide you with a job which you'd be required to take. They could also change their fiscal policy, so they not only have a strong plan on the deficit but a more coherent plan on growth in order to boost employment. They could freeze fuel duty, cut VAT, scrap the beer duty esculator, invest in infrastructure, have a third runway at Heathrow (or something similar) to create more jobs in West London, have a massive house-building programme and then maybe look at creating an active industrial strategy by implementing some of Lord Heseltine's report on growth. That way the Government can boost the private sector in order to create more jobs.
ReplyDeleteThey could do this, they could do that but how exactly are they going to finance this. It's all good and well embarking on this fiscal expansion tirade but would like to hear your thoughts on how exactly such plans are to be financed?
ReplyDeleteTim
I see where you are coming from Tim, but part of the point I am making, is that the current fiscal policy is too harsh and way too constrained therefore they should relax when it comes to deficit reduction.
ReplyDeleteHowever, but on childcare the Government could scrap something like higher-rate pension tax relief to pay for it. The Government could use increase the bank levy to pay for a Jobs Guarantee, they could scrap free TV licences for the over 60s (which does very little for growth) which could be used to hold down fuel duty. The Mirlees Tax Review requests a Land Value Tax which could pay to cut VAT and local authority pension funds could fund 300,000 new homes a year. The Government knows all this but they are still doing absolutely nothing which is worrying.
As Europe has fallen yet into another recession, trade from our main trading partners in Europe should therefore decrease, as this is going to effect our aggregate demand, I think it would be wise now to boost aggregate demand using fiscal policy, so therefore we do not fall into another recession ourselves. This would be wise as it would also create jobs and hence employment, lowering unemployment or at least keeping it to a sustained level.
ReplyDeleteIn agreement with Harry, if trade from trading partners decreases, that means that net exports decrease, which is another comntraction of the AD curve, which could make matters worse. However, this could be counterbalanced by the fact that people will buy more domesticc goods and therefore increase demand through consumption. However, with high unemployment, this looks unlikely because incomes will probably be lower.
ReplyDeleteWill Hunt (my google account won't work)
ReplyDeleteI agree with Harry on this. With the EU being one of our main trading partners falling back into recession it is more important than ever that we maintain aggregate demand using whatever means left, we cannot lower interest rates any more so Fiscal policy seems to be the simplest remaining solution in order to try and prevent unemployment rising again and causing another recession