Notes of caution on unemployment….
So, unemployment is officially down for the second month in a row. Should we a) congratulate ourselves on a job well done or b) take stock and maybe delay the hearty back-slapping a little. My preference is for b but with a slight allowance to say that things are better than they would have been under the Conservatives. As the BBC reports there are several warning markers in the recent statistics:
long-term unemployment, covering those out of work for more than a year, rose by 37,000 to 663,000, the highest figure since 1997.
And the number of people claiming Jobseeker’s Allowance climbed by 23,500 to 1.64 million in January.
The claim that this shows ‘labour market resiliance’, as advanced on Left Foot Forward, is also shot to pieces by a) the number of ‘underemployed’ and b) the very depressed state of wages. It is surely right that the underlying weakness of this fall is a clear indicator that withdrawing government support from the economy at this time would have disastrous consequences. Furthermore, it shows the need to consider radical restructuring rather than sticking-plasters.
The Conservative Party maybe lining-up economists to support its cause but I think its quite clear that there economic case is weak. Hence the new moral panic that the right-wing press is creating around the high inflation figures (the bogeyman of choice on many an occasion to drive through attacks on wages and employment).
One of the issues that will have to be considered in restructuring the economy is the ending of the ‘target-driven’ approach to inflation and its relation to interest rates ie, triggering an automatic rise. This is something that even the IMF has started to question:
In a paper published on 12 February, the IMF’s chief economist, Olivier Blanchard, warned that much thinking by academic macroeconomists leading up to the recession, especially its focus on having one target – inflation – and one instrument to control it – the interest rate – was misplaced. “What is clear, however, is that the behaviour of inflation is much more complex than is assumed in our simple models and that we understand the relationship between activity and inflation quite poorly.
Labour’s fortunes in steering this recovery and probably its fortunes in the polls to a large extent now depend on its radical spirit and action especially in the economic sphere.