The Jobless Crisis: Unemployment forecast to peak at 3.5 million: The jobless total looks set to continue rising and stay high for years to come. Robert Chote reports

UNEMPLOYMENT in Britain is going to get worse before it gets better. Economists expect the jobless total to hit a post-war record later this year and some fear it may not fall below 3 million before the end of the decade.

Worryingly for the Government, the political fall-out may not subside even when unemployment finally begins to fall. Jobless rates around the country are expected to diverge as the national total declines, re-opening the 'North-South divide'.

The Employment Policy Institute predicts that the jobless total will peak well into next year, at between 3.25 and 3.5 million. This is well above the previous post-war record of 3,124,000 in the summer of 1986.

Some City economists are even more pessimistic. Bill Martin, of UBS Phillips and Drew, believes the jobless total will be over 3.5 million by the end of 1994, although Keith Skeoch, of James Capel, expects 2.7 million.

Unemployment has now risen for 33 consecutive months, increasing by 1.4 million. The number of people employed has dropped even more dramatically, by nearly 2 million from a peak of 27 million in June 1990. Employment collapsed by 400,000 in the third quarter of 1992 alone, as the latest dashing of recovery hopes prompted a wave of redundancies.

Unemployment will not start falling until well after the economy begins to recover. After the last recession, the jobless total did not peak until five years after production began to revive.

Most economists believe the economy needs to grow by over 2 per cent a year before many new jobs are created - slower growth can be achieved as existing employees work more efficiently. But the EPI worries that the British economy may not be able to sustain growth this strong for very long, because of rising inflation and a widening trade gap.

Although labour costs are now very subdued, inflation may be boosted by rising long-term unemployment - around 1 million people have now been without work for a year or more. The long-term jobless become demoralised and unattractive to employers, so they put less downward pressure on other workers' pay and inflation. Excluding the long-term jobless, unemployment has been almost flat since the middle of 1991.

The rise in unemployment since 1990 has been eased by a 700,000 contraction in the workforce, partly as disenchanted job-seekers have given up looking for work. The EPI expects the workforce to grow by 600,000 by the end of the decade, much less than in the same period after the last recession. This means that 2 million new jobs need to be created just to pull unemployment back to its pre-recession level of 1.6 million.

But the EPI suspects that a feeble recovery will create only a quarter that amount, some of which will be taken by new labour market entrants rather than the existing unemployed. The EPI thus expects around 3 million jobless at the end of the decade.

The troughs to which unemployment falls during economic recoveries have been growing steadily since the war, from under 500,000 in the 1950s and 1960s to more than 1.5 million in the 1980s. New technology and competition from developing countries have reduced the demand for traditional unskilled male labour, at least at wage levels which make it worth leaving the dole.

Unemployment has risen most rapidly in those regions where it was lowest to start with. Since the jobless total stopped falling in 1990, unemployment has risen by 247 per cent in the South-east, but by only 41 per cent in the North.

Unemployment rates in different parts of the country have thus converged. At its low in 1990, the unemployment rate in the South- east was 35 per cent below the national average and well under half the rate in the North. Last month unemployment in the South-east was equal to the national average - around one in 10 - and only 15 per cent below the North.

According to the latest Cambridge Economic Review, up to half this convergence is a typical feature of recessions since the mid-1970s. The North-South divide always narrows in downturns and widens in recoveries.

But the effect has been reinforced in this recession. The South has been hit hard because of the consumer and mortgage debt burden built up in the 1980s. High interest rates and falling house prices have had more impact. Distribution, hotels, catering, financial and business services have suffered particularly badly.

To the extent that the recovery results from falling interest rates, the South should benefit most in terms of employment. Relieving the southern debt burden will be of particular help to small services businesses, among which job creation is usually quickest. But sterling's devaluation will offset this effect. The falling pound benefits companies that sell their goods abroad. They are more likely to be in manufacturing, and be found in the North or the Midlands.

It is this interaction between interest rates, sterling's level and normal cyclical changes which will shape Britain's employment map in the rest of the 1990s.

Leading article, page 18

(Graphics omitted)

Voices
The Sumatran tiger, endemic to the Indonesian island of Sumatra, is an endangered species
voicesJonathon Porritt: The wild tiger population is thought to have dropped by 97 per cent since 1900
Arts and Entertainment
Beast would strip to his underpants and take to the stage with a slogan scrawled on his bare chest whilst fans shouted “you fat bastard” at him
musicIndie music promoter was was a feature at Carter gigs
News
news
Arts and Entertainment
Story line: Susanoo slays the Yamata no Orochi serpent in the Japanese version of a myth dating back 40,000 years
arts + entsApplying the theory of evolution to the world's many mythologies
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Performers dressed as Tunnocks chocolate teacakes, a renowned Scottish confectionary, perform during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
news
Life and Style
Popular plonk: Lambrusco is selling strong
Food + drinkNaff Seventies corner-shop staple is this year's Aperol Spritz
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Shake down: Michelle and Barack Obama bump knuckles before an election night rally in Minnesota in 2008, the 'Washington Post' called it 'the fist bump heard round the world'
newsThe pound, a.k.a. the dap, greatly improves hygiene
Arts and Entertainment
La Roux
music
Arts and Entertainment
Graham Fellows as John Shuttleworth
comedySean O'Grady joins Graham Fellows down his local Spar
News
people
News
Ross Burden pictured in 2002
people
News
Elisabeth Murdoch: The 44-year-old said she felt a responsibility to 'stand up and be counted’'
media... says Rupert Murdoch
Arts and Entertainment
tv
Extras
indybest
Sport
Arsenal signing Calum Chambers
sportGunners complete £16m transfer of Southampton youngster
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Junior / Graduate Application Support Engineer

£26000 per annum: Ashdown Group: A highly successful international media organ...

QA Manager - North Manchester - Nuclear & MOD - £40k+

£35000 - £41000 per annum + competitive: Progressive Recruitment: QA Manager -...

Property Finance Partner

Very Competitive Salary: Austen Lloyd: LONDON - BANKING / PROPERTY FINANCE - ...

Agile Tester

£28000 - £30000 per annum + competitive: Progressive Recruitment: An ambitious...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on