Thursday, 16 September 2010

Portends point to double dip disaster

From the Guardian:
The number of people claiming unemployment benefits jumped unexpectedly last month, fuelling concern that the government's austerity budget in June undermined business confidence and pushed the economy into reverse.

The claimant count rose by 2,300 in August to 1.47m, according to the Office for National Statistics, confounding City expectations that a downward trend started in January would continue throughout the summer.

The broader International Labour Organisation measure of the number of people without a job registered a fall, but the decrease of 8,000, to 2.467m was also below City forecasts. Analysts had been expecting a decline of around 35,000.


Howard Archer at IHS Global Insight said the data was "both disappointing and worrying" fuelling fears that the improvement in the labour market is coming to an end, "even before public sector job cutting really gets under way".

Chris Williamson, chief economist at Markit, said the labour market was "showing signs of weakening" which can be "largely explained by the fact that the increase in employment was driven by part-time workers" Alan Clarke, UK economist at BNP Pariibas said the increase in employment wopuld represent a peak.

"The worsening in unemployment is consistent with what we know is happening to growth. Hence we very much doubt the buoyancy of the employment data will last much longer.

Archer added the jump in part-time employment indicated that many companies are reluctant to add full-time workers amid serious concerns over the sustainability and longer-term strength of the recovery. Part-time workers now account for 27.2% of total employment, up from 25.4% at mid-2008. (1)
So it's starting to look very dicey, again.

To some extent, we can't blame George Osborne's ideologically driven cuts - too much, too fast - for this. It's part of an international slowdown (2), which Osborne is not responsible for, just as Gordon Brown wasn't responsible for the original recession.

That said, the austerity drive, if it is followed through on, will probably make any double dip worse for Britain, as it will make the recession deeper, and longer. And the big risk is that the government will have too much political capital invested in its cuts and austerity to resile from them and provide stimulus when it's needed.

Even if it does, it's likely that this will be seen as panic, desperation, and disaster as they've made such a big deal of how the cuts need to be applied immediately and the debt and deficit were out of control. Investors won't listen, the bond markets will spook. Then, absurdly, we'll be in precisely the position the Tories claimed we were in prior to the election - weighed down by debt which we can't re-finance, a widening deficit due to the receding economy, and facing a credit downgrade.

Nice work, George.

I'm experiencing the frightening, horrible realization that Ed Balls may be the person who has most accurately described the current situation, and the appropriate course of action.
1 - "Unemployment claimant count rises unexpectedly," by Phillip Inman. Published in The Guardian, 15th of September, 2010. (
2 - "Wasteland: Europe stalked by spectre of mass unemployment," by Alastair dawber. Published in the Independent, 16th of September, 2010. (

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I am still here.

 I am still here.  I haven't gone away.  I'm just trying to shame you all into better behaviour through my disapproving silence.