Sean O’Grady: High unemployment is here to stay


Tuesday 13 January 2009 01:00

When Labour came to power in 1997, the number of those out of work for six months or longer stood at just more than one million. It is now 726,000, up 12 per cent on last year, and certain to rise higher. Some 180,000 were made redundant from August to October last year, according to the latest data, and that trend will accelerate. Could the long-term jobless total reach one million again, wiping out all the Government's hard-won gains?

The news from the jobs market is grim. Surveys by the CBI and the British Chambers of Commerce send the same message: We ain't seen nothing yet. Firms were "hoarding labour" last autumn, waiting to see if the economy might improve. No longer, as the recent rounds of redundancies and corporate collapses vividly illustrate.

Thus, unemployment is a "lagging indicator" – it only really gets going when the economy has taken a nosedive. The economy has indeed "fallen off a cliff" in recent weeks.

Even if Mr Brown does indeed "create" 100,000 jobs and help the long-term unemployed, there seems little to stop the global credit crisis inflicting vastly more damage, as ministers admit. From 1.8 million today, unemployment will crest the two million mark by spring and three million in another year, the sharpest rise in the developed world. The reggae band UB40 may find an opportunity tore-release their 1981 hit "One in Ten" to reflect the return of mass unemployment and a 10 per cent unemployment rate.

But even though the rise in unemployment in the 1979-81 recession was unprecedented in the post-war era, and accompanied by riots, unemployment did not peak until 1984, two or three years into the recovery, at 3.28 million, or 11.9 per cent of the workforce (against 6 per cent now). That unemployment was so stubborn was partly because the UK's only partly reformed labour market made hiring workers a costly and inflexible commitment. By the early 1990s recession, the lag was smaller; it peaked then at just over one million in early 1993, a year or two after the recovery began. It will still lag in this downturn, and is very unlikely to start falling until 2010, well after when ministers forecast the recovery will start.

So the really bad news is that, even after the economy improves, unemployment will continue to rise and perhaps for some years: consumer confidence, the war on child poverty and the housing market will be held back with it.

Where will new jobs will come from? An optimistic spin on this comes, where else, from the Business Secretary Lord Mandelson, who said yesterday they would emerge from "a renaissance in UK manufacturing and the expansion of the UK's knowledge-based industries". Thus Lord Mandelson becomes the first cabinet minister, even obliquely, to claim to be able to detect the green shoots of recovery, and before the recession has officially begun.

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