Good news. Unemployment is at a six-year high. For anyone out of employment and seeking a job, this might seem a joke in poor taste, yet the truth is that there is more to celebrate than to lament in yesterday's clutch of labour data.
The reason unemployment is rising is not because there are fewer jobs. On the contrary, despite the doom-laden prophecies of many pundits, jobs continue to be created at a reasonably pleasing pace, if a somewhat slower one than we've seen in the past. Rather, it is because the workforce is also expanding at a near-record rate.
This is only partly down to Jan Polski and his team of immigrant builders. Just as important are rapidly rising levels of labour participation, particularly among women and older men. More of us want, or have to, work than ever before. The trouble is that the number of people who want a job in the UK, from overseas and from the existing population, is rising more strongly than the number of jobs available.
The Work Foundation calculates that the economy would have needed to create 110,000 jobs in the past quarter to stop unemployment going up. I'm not sure the UK has ever achieved such a high level of job creation, and in today's sluggish economic conditions, it is falling quite a long way short.
Present levels of job creation are no more than average. Because of the consumer slowdown, it is particularly poor in retail and hospitality right now. But nor is all the job creation currently taking place in the public sector. Jobs in business services are growing as strongly as those in health and education.
Unfortunately, it is not by enough. The rise in the jobless rate over the past year is the biggest out of all the OECD nations. Nonetheless, the most remarkable feature of these figures is the UK's continued ability to accommodate such substantial growth in the workforce.
In fact, the official figures probably understate the true size of the phenomenon, since much of the new immigrant labour finds its way into the cash economy and therefore doesn't show up in the ONS data.
Wherever it comes from, the rapidly growing workforce is one of the primary reasons for thinking the Bank of England was wrong to increase interest rates earlier this month. Minutes to the meeting of the Monetary Policy Committee, which took this decision, published yesterday, show a quite marked divergence of view over the significance and impact of this growth in the workforce.
For David Blanchflower, the MPC's newest addition, it was enough to make him vote against the interest rate rise. I'm sure he is right about this. Rising labour participation and immigration are creating greater levels of slack in the economy than the Bank has built into its projections. If there's more capacity, the economy can grow at a faster rate without triggering inflation than has perhaps been possible in the past.
Even those who voted for a rate rise seemed partially to acknowledge this point. The primary reason for raising rates is identified in the minutes as this autumn's expected spike in inflation to close to 3 per cent, which the MPC thought might lead to inflationary expectations rising just before the majority of next year's pay settlements. The presiding view was that if the decision proves premature, it could easily be reversed. Rising levels of immigration may not be to everyone's taste, but at least it is helping to keep interest rates low.
British Energy: still struggling
British Energy was the biggest faller in the FTSE 350 yesterday despite the release of quarterly profit numbers which beat market forecasts by a country mile. The reason was that for the third year running it now looks as if the nuclear power operator will miss its output targets.
The chief executive, Bill Coley, insists that his employees are still on notice to meet the target come what may, but they've got quite a bit of catching up to do and he concedes that achieving output of 63 terawatt hours for the year to the end of March 2007 now looks "very challenging". Instead, he expects the company to come in at somewhere in between 61 and 63 TWh.
Exceptionally high energy prices for the time being are supporting record profitability, yet it only requires these prices to slip by a relatively small margin for the company to be back in the red. With electricity prices at rock bottom a few years back, the company became insolvent and had to be bailed out by the Government.
One of the characteristics of nuclear power generation is high fixed operating costs, so to remain economic British Energy must maintain as high a load factor as possible. Any enforced shut downs, or "outages" to use the industry jargon, either for safety or operational reasons, severely damages this endeavour.
The present slow pace of improvement in load factor owes more to years of past underinvestment than anything else. But worryingly, Mr Coley admits to a degree of human error in the latest series of outages. Although apparently limited to just one episode at Torness, such human failings raise questions about the quality of management and, by extension, British Energy's ability to achieve continued further improvements in output.
As long as the oil price remains high, this may not seem to matter too much. But if Lord Browne of Madingley, the chief executive of BP, is right in thinking that eventually oil will subside to a normalised level of about $40 (£21) a barrel, then British Energy could once more be in some trouble. In any case, Mr Coley needs very substantially to improve his operational performance to justify the present share price.
At the time of the last rescue, the Government acquired a 65 per cent share stake in British Energy in return for assuming liability for the company's decommissioning costs. It plans to sell these shares to investors this autumn.
As the Commons Trade and Industry Select Committee points out in a report published yesterday, estimates of the costs of nuclear decommissioning just keep on rising. Even the present one is likely very considerably to understate the eventual reality. Since the proceeds of the share sale are to be set aside to help defray these costs, the Government is more than usually keen to secure the best possible price. Yesterday's statement hardly provides the most conducive of backdrops.
Perhaps the most desirable solution to the British Energy "problem", then, would be for it to be acquired outright by the world's most experienced and successful nuclear power operator, Eléctricité de France. EdF already has substantial electricity distribution and power generation assets in this country, so there may be competition issues to address, but assuming EdF were willing it would certainly provide an eloquent answer to the many questions that surround the future of nuclear power generation in this country.
As things stand, there is virtually no chance of privately financed, new nuclear build in the UK, despite Government and industry insistence to the contrary. The City could not be persuaded to invest without market subvention or Government subsidy.
Yet perhaps EdF, which successfully services the French market largely through nuclear sources, might risk the necessary investment off its own back, particularly if it were able to do so from the platform of an existing British nuclear operation. The Government needs fully to explore these options with EdF before haring off down the path of another possibly doomed stock market offering.
Plainly there would be political sensitivities in selling the remnants of Britain's civil nuclear capability to foreign interests, but if we can sell our airports to the Spanish, why not our nuclear power stations to the French? The Government would undoubtedly get more bangs for its bucks by going down this route. If Gordon Brown, the Chancellor, fancies it, he already has a useful point of contact. His brother, Andrew, is EdF's London head of media relations.Reuse content