David Blanchflower: A sign of recovery? Most people don't feel it

  • @D_Blanchflower

The economy is growing faster than expected, but then it's going to slow more rapidly than expected as the 2015 election approaches.

GDP has started to expand, although the unemployment rate has remained unchanged over the past two months. Real wages continue to fall and are down by around 6 per cent compared with when the Coalition was formed, although there has been some slowing in the rate of decline.

The latest employment data showed that over the past quarter the number of employees was down by 60,000 while self-employment was up by 211,000. The earnings of a typical self-employed worker are lower than the wages of the typical employee.

The 5.5 million public sector workers, who in the latest data are enjoying 0.5 per cent annual wage growth, or -1.4 per cent real wage declines, presumably don't count. Rising house prices don't benefit the young. The Chancellor claimed again that we're "all in this together" but most workers and the young probably haven't noticed.

A major problem faced by the Coalition was made clear in a YouGov survey of 1,919 British adults taken earlier this month. Respondents were asked: "Do you personally feel better or worse off than you did one year ago?"; 16 per cent said "Better than a year ago"; 27 per cent said "Worse than a year ago"; 44 per cent said "About the same". Interestingly, of those who said they would vote Tory, only 30 per cent said they felt better. There may be a sign of recovery, but most people don't feel it. This Budget looks unlikely to create a feelgood factor.

The Office for Budget Responsibility forecast for growth has been upgraded from 2.4 per cent to 2.7 per cent, but that is unsustainable so the economy will slow to 2.2 per cent in 2015. According to the OBR, the Budget doesn't get into surplus, assuming all goes to plan, until 2017-18, well past Mr Osborne's claim that this would happen by the end of this parliament. It does not expect exports to make a contribution to growth over the next five years.

I am absolutely delighted, though, that the Chancellor has responded to my ongoing campaign to remove those under 21 from employer's NI contributions. This helps to price youngsters into jobs. Sadly, though, we still aren't all in this together.