UK Unemployment: January 2010

Wednesday, January 20th, 2010 - credit crunch, economics, Employment, recruitment

UK Unemployment: January 2010

Unemployment Report

The Office of National Statistics released the UK Unemployment data today, and it contained a small shock: unemployment fell by 7,000, the first fall in 18months. Total unemployment stood at 2.46 million for the three months to November, down 7,000 on the figure for the previous three months. It ends the continuous rise in unemployment that began in the summer of 2008 after the recession began.

But, rightfully, Government ministers while warming to the figures – particularly in an election year – were cautious, and warned that unemployment could rise again in 2010. Why was this?

Here, I am just going to summarise the excellent article by Stephanie Flanders, the economics editor of the BBC, which she titled “Both accident and design:”

  • Companies entered the recession with high levels of profit (greater than 1992 or 2002), thus giving them the ability to retain workers
  • Workers saw that the benefits culture of the past has receeded, and hence it is not as profitable/easy economically to accept unemployment
  • Workers therefore as a first option took low pay, or periods of lay off. Companies retained the workers they needed
  • If employees were made redundant, then many having found difficulty in getting back into work, have taken part-time jobs
  • While the commercial sector still shed jobs, the Government between October 2008 and October 2009 took on 90,000 extra people, mostly on short-term contract basis. That is almost the equivalent of doubling the size of the British Army!
  • The reason that youth unemployment has stayed high, is simply that companies are not taking on new employees. It took time for all the government training initiatives to kick in, and more have stayed on longer in higher education

Hence as Flanders points out, much of the reduction is due to a combination of factors and forces on the economy, workers and employers, over one single or group of initiatives by the Government. Combining that with the fact that any new UK Government post June 2010 will have to make large cuts in the Civil Service, when the government has been the employer of uptake in this period, and you can see why ministers were not that quick to claim the reduction for themselves.

One thing is true so far of this recession, and it is that in its effect on the high street, it has been relatively light. While spending yes is down, and production activity yes is down, spending on the high street is not down as greatly: 6% versus manufacturing activity of 10% and greater. At some point these divergence has to close, and that probably means a meeting in the middle: more unemployment, more manufacturing.

China and the far east is coming back strongly, while both the UK and the USA are seen as having started stuttering recoveries. Technically, the peak in unemployment comes around 18months after the turn around in the economy. When the stock market turned in April 2009, and the economy seems to have turned in quarter4 of 2009, that would suggest peak unemployment will be late 2010 to early 2011. When we know the debt levels as country we are carrying, and the fact that the government have been picking up much of the unemployment slack in this recession from both a fiscal and employment view point, there is little to suggest that won’t still remain true.

The only question remaining is: how high will peak UK unemployment reach? That answer is now considered lower than the 3million+ most made in the early stages. I don’t see a smooth 2010, but it won’t get as bad.

Good Luck!


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