It may be too late to prevent recession

George Osborne's policies have failed. He talked down the economy -- and now it is sinking.

The data releases this week have all been bad for the coalition. It started in the United States, which matters because generally what happens there is repeated in the UK a few months later.

First, the Conference Board published data on consumer confidence that showed a much greater collapse than had been expected, especially in relation to the respondents' expectations for the future.

Second, the Case-Shiller house price index -- the leading measure of US home prices -- shows that the US National Home Price Index declined by 4.2 per cent in the first quarter of 2011, after having fallen 3.6 per cent in the fourth quarter of 2010. The National Index hit a new recession low with the first quarter's data and posted an annual decline of 5.1 per cent versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels. As of March 2011, 19 of the 20 MSAs covered the index were down compared to March 2010.

Third, ahead of the official release of employment data on Friday, an ADP Employment Services report suggests that private-sector payroll growth slowed sharply in May, falling to the lowest level in eight months. This prompted some economists to lower their forecasts for job growth in Friday's data release. It looks as if the US is slowing.

In Europe, the final Markit eurozone manufacturing PMI fell sharply to a seven-month low of 54.6 in May, down from 58.0 in April and below the flash estimate of 54.8. The fall in the index was the largest since November 2008, as manufacturers reported slower rates of increase in output, new orders, employment and inventory accumulation. China is also slowing. Economic output in Australia shrank by 1.2 per cent in the three months to March -- the worst quarterly slide since 1991 -- the national accounts of the Australian Bureau of Statistics showed yesterday.

The data releases for the UK today were truly awful. They follow from the public finance data that shows that, far from paying off the debt, Osborne is increasing it. Plus such growth as there wasn't -­ GDP grew by zero over the past six months -- was driven by government spending. Then, today, the PMI for manufacturing in May was worse than the market expected.

According to Capital Economics, on past form, that leaves the balance consistent with quarterly falls in manufacturing output of around 1 per cent. Some of this fall, it argues, is likely to have been driven by the temporary disruption to supply chains caused by the Japanese earthquake. But Capital Economics points out that the new orders balance also fell from 50.8 to 48.3, which, it argues, suggests that "beneath the monthly volatility, a sharp underlying slowdown in demand is taking place".

There were also a number of statistical releases from the Bank of England, which added to the bleak picture. It appears that banks are simply not lending enough to get the economy moving. This suggests the poorly named Merlin project -- which should be renamed the Mickey Mouse project -- has not worked any magic. First, the money-supply growth was weak. Second, the stock of lending to UK businesses overall contracted in the three months to February, as did the stock of lending to small and medium-sized enterprises. Third, the number of loans approved for house purchases fell by 4 per cent to a four-month low of 45,166 in April ­- the lowest figure for April since records began in 1992.

This inept Chancellor has talked the economy down by falsely claiming it was bankrupt when it wasn't, which has decimated animal spirits among both businesses and consumers. He has also tried to blame a once-in-a-hundred-year global financial crisis on the previous government, which was clearly also untrue and hyperbolic. Osborne has implemented toothless regulation over the banks and has demonstrably failed to get them to lend. He also has no interest in controlling bankers' bonuses, despite his absurd claims to the contrary when he was shadow chancellor. And all of this before the public spending cuts hit: currently it is the public sector that is the driver for growth but that is all about to change. The public finances are worsening, not improving.

The government's economic policy is in total disarray and the economy is sinking. Osborne has been hoisted by his own petard; his numerous false claims were inevitably going to catch up with him and now they have. The coalition's austerity programme was never based on sound economics and was simply a political move to shrink the state. Interestingly, the claims that the economics profession supported his actions have turned out to be false. In my NS column in the issue out tomorrow, I make clear that one of the initial signatories to the letter to the Times that Osborne touted as supporting him ­- the 2010 Nobel Prize winner in economics, Chris Pissarides -­ has now, embarrassingly for Osborne, turned against him and now opposes the ill-conceived and wreckless austerity programme of cuts and tax increases.

It is hard to find any economists outside the City of London that do support the government's strategy, other than a few of the usual right-wing hangers-on.

It is time for Osborne to explain to the British people why his economic policies have failed and what he intends to do about it. My fear is that Slasher has inflicted so much damage on the British economy that it is too late to prevent us slipping back into recession.

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

Photo: Getty
Show Hide image

Millennials are caught between limited opportunities and declining sperm counts

The lifestyles led by those picturing a future family could make it much harder to have one.

Amid all of the balanced and scientific responses to the news that male sperm counts have decreased by 60 per cent in the last 40 years, one outlet could be relied upon to give a level-headed analysis.

“Humans could become EXTINCT as sperm counts plummet 60 per cent in 40 years – and modern living is to blame,” shouted the Sun’s bold typeface and capitalisation. While extinction is a long way off – at least from this particular threat – there are serious concerns about birth rates in the year to come, with 15 per cent of the report’s 7,500-strong sample size seeing their fertility impaired.

This is not a position men are used to being in. For once, it is our ability to procreate that is being attacked. Scientists behind the study hope that calling into question men’s reproductive privilege will serve as a “wake-up call” for health authorities and fellow scientists to investigate the causes, and for men to take their lifestyles more seriously.

And yet, at this point, many men would be hard-pressed to care. In blaming “modern living”, the Sun predictably jumps the gun – the study was only designed to confirm or disprove a decrease. Research into causation will now follow, but potential factors hypothesised by the study include “endocrine disrupting chemicals, pesticides, heat and lifestyle factors, including diet, stress, smoking and body mass index”. A poor diet, stress, smoking and a high BMI? It all sounds scarily familiar.

That 21st century life creates stressful conditions in which our health is adversely affected is not exactly breaking news. Mental health diagnoses have increased – with many NHS trusts seeing a rise of 30 per cent in referrals, according to recent figures from BBC Radio 5 Live – and obesity is still a huge concern.

It's no surprise that reproductive health will be compromised, too. But there is a cruel irony in that the very same conditions which erode our reproductive health are precisely those which mean we might not care.

For the majority of millennials, the atmosphere preferred for raising a family – owning a house, financial security, and long-term job prospects – has never seemed so distant. This is despite working longer hours, for more years. That cliché notion of “settling down” is far beyond the horizon, something unimaginable for many trying to claw their way on to the housing ladder, or into a steady and secure career.

By the time that millennial men reach the point in their lives where they have battled stress, a poor diet and caffeine dependency in order to become financially – or romantically – stable enough to want to build a family, sperm counts might be irreparably damaged. There are, after all, fears that the rate of decline is not only stable, but rising.

The findings of the study do indicate that sperm levels are still within the “normal” range, so we’re not at Children of Men levels yet. But if the threat of apocalypse doesn’t spur men into action, the thought of declining health definitely should.

Perhaps it is the complacency derived from better living conditions, higher birth rates and longer life expectancy that leaves us so cold when it comes to these findings – but continuing to take risks with our health will have longer-term side-effects.

It shouldn’t take a study to tell us that 21st century living is bad for our health. Scientists behind the research have a point: we must “wake up” and make more of an effort to keep ourselves in good health.

We must eat fewer processed meats, smoke fewer cigarettes, take more time away from our desks and, to quote “Fitter Happier”, Radiohead’s ode to modern misery, get “regular exercise at the gym, three days a week”. We might not be able to change millennial living, but we can certainly create our own space within it.

Who knows – our lives, those of our as-yet-unconceived children and, if the Sun is to be believed, the entire human race, might depend upon it.