What prospect for UK unemployment in 2009?

Tuesday, September 30th, 2008 - job hunting, unemployment

The credit crunch, created by the US housing market crisis, has so far not affected either headline UK consumer spending, or UK unemployment – but are the first signs of the rot now beginning to show?

In summary – YES! We might not yet be seeing the scale of unemployment, but it is now revealing itself.

The reasons for this long gestation period are three fold:
– The UK is always at least six to twelve months behind the UK
– The industries effected so far are long cycle: how often do you move, and hence buy a kitchen, carpets or new bedding?
– UK consumers have so far switched spending: now they can’t switch any more to lower cost items. The next thing to do is cut

Already, house builders and associated industries have shut down – even the solicitors are laying people off. Construction is highly reliant on finance models, so no loans means no construction. The only thing keeping some sites going were sales, at hugely discounted levels – often up to 35%, the properties industry average Gross Profit Margin, just to keep the cash flowing.

The next industry to fall was finance, with the remortgage and consolidation loans financing products stalling and the collapsing.

In the past few week, we have seen national level banks collapse: Wachovia in the US, HBoS and Bradford and Bingley in the UK; and now Fortis in Belgium. The HBoS Lloyds TSB merge offers 40,000 redundancies at the headline level – gulp!

And now its the turns of the retailers, showing that UK high street spending is being effected: furnishing group Roseby’s went into administration, while MFI was bought out by management (both part of the hosuing slow down), and now sports retailer JJB warns that it may not survive – no wonder SportsDirect founder Mike Ashley has put Newcastle FC up for sale!

Are there any good signs? Not yet, with the US House of Representatives rejecting the $700bn (£380bn) rescue deal, global stock markets have fallen an average of 7% in one day. What economists are hoping is that two groups will help out to reduce UK unemployment impact: the elderly retiring in the face of such vast unemployment, while the Eastern Europeans go home in part due to the construction needs of Euro 2012 in Poland.

While some skills and sectors remain solid employment areas – Human Resources for instance, with such high levels of redundancies – others are falling quickly: anyone can be a sales person!

My thought here is that, whatever the fixes of the politicians, this recession will be a middle class one: the low skilled will just move and do anything to survive; the rich can ride out the storm – while the middle class will be too slow to react, worrying about paying their buy-2-let mortgages and honouring their education/tofu suppers to notice the approaching storm.

I predict UK unemployment will rise by at least 1million in 2009 – those jobs left by the elderly and the Eastern Europeans will remain unfilled, until 2010 when they return to fill them.

Watch out middle England!

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