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)

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
glastonbury
News
i100
Arts and Entertainment
Shock of the news: Jake Gyllenhaal in ‘Nightcrawler’
filmReview: Gyllenhaal, in one of his finest performances, is funny, engaging and sinister all at once
Arts and Entertainment
Shelley Duvall stars in Stanley Kubrick's The Shining
filmCritic Kaleem Aftab picks his favourites for Halloween
News
people
Arts and Entertainment
Kit Harington has been given a huge pay rise to extend his contract as Jon Snow in Game of Thrones
tv
Life and Style
Taste the difference: Nell Frizzell tucks into a fry-up in Jesse's cafe in east London
food + drinkHow a bike accident left one woman living in a distorted world in which spices smell of old socks and muesli tastes like pork fat
Sport
Luke Shaw’s performance in the derby will be key to how his Manchester United side get on
footballBeating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Life and Style
Google's doodle celebrating Halloween 2014
tech
Arts and Entertainment
Don’t send in the clowns: masks and make-up conceal true facial expressions, thwarting our instinct to read people’s minds through their faces, as seen in ‘It’
filmThis Halloween, we ask what makes Ouija boards, demon dolls, and evil clowns so frightening?
News
peopleFarage challenges 'liberally biased' comedians to 'call him a narcissist'
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

Senior IP Opportunity at Major Firm

vary Attractive Salary: Austen Lloyd: MANCHESTER - AN OPENING AT A VERY HIGH Q...

Nursery Manager

£100 - £110 per day: Randstad Education Ilford: Nursery Manager Long term Ran...

Sales Consultant – Permanent – West Sussex – £24-£25k plus commission and other benefits

£24000 - £25000 Per Annum plus company car and commission: Clearwater People S...

SEN Teaching Assistant

£45 - £65 per day: Randstad Education Bristol: Supply SEN Support Jobs in Bris...

Day In a Page

The drugs revolution starts now as MPs agree its high time for change

The drugs revolution starts now as MPs agree its high time for change

Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

Gotcha! The camera is turned on tabloid editors

Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

Fall of the Berlin Wall

It was thanks to Gorbachev that this symbol of division fell
Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

What makes ouija boards and demon dolls scary?

Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

Rose Rouse's safari in modern Britain

Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

'My world of no smell and odd tastes'

A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

Matt Parker is proud of his square roots

The "stand-up mathematician" is using comedy nights to preach maths to big audiences
Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

Paul Scholes column

Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

Frank Warren column

Call me an old git, but I just can't see that there's a place for women’s boxing
Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

Adrian Heath's American dream...

Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
Simon Hart: Manchester City will rise again but they need to change their attitude

Manchester City will rise again but they need to change their attitude

Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes