More Tory disinformation on the economy

Now, Iain Duncan Smith is at it.

More misinformation from another cabinet minister at the Tory jamboree in Cardiff. Iain Duncan Smith told the conference that unemployment was less of a problem than some have suggested. "It's short-sighted to say there aren't any jobs at the moment. The fact is, there are around half a million vacancies in the economy at the moment," he said. "It's not the absence of jobs that's the problem. It's the failure to match the unemployed to the jobs there are."

OK, let's take a look at this dumb claim. It is true that there are two and a half million unemployed people and half a million vacancies; so there are five unemployed people chasing each recorded vacancy. But to put that in context, exactly two years ago, there were two million unemployed and 677,000 vacancies -- or one vacancy for every three unemployed people. So, at the very least, it is harder to find a job than it was two years ago, as there aren't enough jobs. Doesn't take a rocket scientist to work that out.

It turns out that capitalist economies need some unemployment to allow for the rebalancing away from goods that people don't want to goods that they do. That means there is an available pool of labour for these new firms to hire from. It is also efficient for an economy to allow people to move between jobs they don't like to ones that they do. That is why we subsidise search. The problem comes when unemployment durations lengthen, as they have recently. Today, a third of the unemployment durations are more than 12 months long, compared with 22 per cent two years ago. Skills deteriorate when no jobs are available, which is why recessions hurt.

A further problem is that there is a mismatch between the skills the unemployed have and those required for the vacancies. There is also the problem that the vacancies are in one place and the unemployed live elsewhere. There are jobs available as experienced brain surgeons in London but the unemployed are 22 years old, with no experience and no qualifications and live in Middlesbrough. Nearly a million of the total stock of unemployed people are under the age of 25. How exactly are they going to fill the vacancies that require experience? The only way to get a job is to have experience but the only way to get experience is to have a job.

Over the past two years, overall employment fell by 210,000 while employment of those aged between 16 and 24 fell by 351,000. In contrast, the employment of those aged between 25 and 34 increased by 171,000, while that of those who are 35 and over fell by 30,000. This doesn't look like a failure to fill available vacancies. The jobs have gone. Plus, the government is reducing funding for training, so that is going to make it harder to solve the mismatch problem. And there is a public-sector hiring freeze. Too many unemployed, chasing too few jobs.

The problem is the lack of vacancies, not the fact that the unemployed don't want to get on their bikes. It is not their fault, as much as you might like it to be. The unemployed are there involuntarily and not by choice. Sorry Iain, back to the drawing board. There just aren't enough jobs at the moment and things are going to get much worse -- and soon.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.