Tuesday, 24 January 2012

David Cameron is downright delusional if he still thinks unemployment will fall over this parliament

The Golden Latrine dimly remembers July 2010, one month after the Coalition's election - a time when he was still hiding under the duvet, fingers firmly plugged in his ears, la-la-laing and praying it was all just a feverish dream.

Back then our freshly-minted PM latched on to figures from the Office of Budget Responsibility (OBR) to confidently predict during Prime Minister's Questions: "Unemployment is going to be falling during this Parliament". Let me just repeat that: Unemployment is going to be falling during this Parliament.

While it was transparently obvious that the deficit reduction plan was going to wipe out large swathes of public sector jobs, Cameron was insistent that the growth in the private sector would more than makes up it.

In fact, as recently as June 2011, Cameron's friends at the Thatcherite Centre for Policy Studies were claiming that public sector job losses would be offset by a ratio of 3:1 in the year from March 2011.

Those claims now look openly delusional, to put it mildly. Over the last year, new private sector jobs have (just) offset public sector job losses, but I don't imagine that momentum is likely to be maintained.

Cameron, meanwhile, is still claiming that there have been over 500,000 new private sector jobs created since he was elected, a claim which some minimal digging from Channel 4's FactCheck proved to be just plain untrue.

New statistics released on January 18 by the Office for National Statistics show unemploymemt at 2.68m (8.3%), the highest since 1995. David Cameron responded at PMQs by taking "responsibility" for the figures, rather than the blame - a stance nicely lampooned by the Guardian's parliamentary sketch writer Simon Hoggart:

[Cameron said] "The government takes absolute responsibility for everything that happens in our economy, and I take responsibility for that." But not the blame. It might be the government's responsibility, but it isn't their fault.

Except clearly it is. The idea that the private sector could take the slack for the wholesale vandalism of the state (and by extension, public sector jobs) has been shown to be fundamentally flawed. In the three months to November, employment in the private sector rose by 5,000, while employment in the public sector fell by 67,000.

There was also a large increase in part-time work, a classic sign, as Larry Elliott has pointed out, of weak demand in the labour market.

And why does all of this matter, you ask? Because unemployment is the spanner in the economy, creating a vicious circle. When unemployment is high, people have less money to spend: benefits don't stretch far, and companies can get away with offering pitiful wage increases to those clinging to a job, knowing employees will be take whatever they're offered. But that lack of spending hits the economy, which means new jobs aren't created. It's a cruel algebra, and one that looks set to be troubling the UK for some time to come.

No comments: