David Prosser: The day the good news on unemployment came to an abrupt end

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The Independent Online

Outlook And so it begins. Although unemployment has been falling since the beginning of the year, it was always clear this could not last. The planned retrenchment of the public sector was always going to be too extensive for private sector hiring to fully compensate for the jobs lost, even with the unexpectedly rapid economic growth the UK enjoyed in the second quarter of the year.

Still, what's really disturbing about the rise we saw in claimant count unemployment in August is that joblessness now seems to be spiking up even before the great public sector cull has really begun. Unemployment has stopped coming down even earlier than we feared.

Nor is the record rise in employment recorded during the second quarter much of a cause for celebration. A good deal of the increase is accounted for by students taking jobs – although we should be grateful that these posts existed – and by a further expansion in the part-time or temporary workforce. This is not job creation in the sense that we used to think of before the financial crisis.

That people were prepared to take on such posts – and that workers have been so restrained in their pay demands – goes a good way to explaining why unemployment did not rise to much higher levels during the downturn. But the plateau the figures reached as the UK exited recession may have created a false sense of security. Not only is joblessness now significantly higher than before the crisis, there is every chance of it rising very rapidly again over the next 12 months, even without a double-dip recession.

Earlier this week, the International Monetary Fund warned that unemployment was as serious a problem for Western governments as debt – more so, in some cases – a remarkable assertion for an organisation that is usually so hawkish on government borrowing. The UK has been fortunate to escape the fate of nations such as Spain, where the unemployment rate, at 20 per cent, is roughly double what it is here. But if we proceed on the economic path currently charted – rapid public spending cuts and no new monetary policy stimulus – the reprieve may prove temporary.