What do the unemployment figures actually show?

There was no good news in today's figures -- and this is just the beginning.

The awful unemployment numbers today came as no surprise to those of us who have been arguing these many months that George Osborne's economic strategy is disastrous for the British economy. There was never the slightest prospect of a expansionary fiscal contraction in the depths of a once-in-a-century financial crisis.

This is all likely to get a lot worse over the next few months. Unemployment rising, the number of jobs and total hours falling and rising unemployment durations. There was no good news.

David Cameron, master of understatement, admitted at PMQs today, at which he took a batterring over the economy, that the numbers were "disappointing". Indeed, Labour today accused Cameron of "bluster, evasion and untruths" in his attempt to defend what they called his "failing economic record". Liam Byrne, Labour's shadow work and pensions secretary, said:

David Cameron's complacency today was simply breathtaking. And, under pressure to explain why unemployment is rising and the economy flatlining, he once again resorted to bluster and evasion and got his figures badly wrong.

So what did the ONS data release actually show, rather than what the Prime Minister wished they showed?

1. An increase in ILO unemployment of 80,000 on the rolling May-July quarter, going over the 2.5 million mark. The unemployment rate remains at 7.9 per cent.

2. The more timely claimant count for August increased by 20,000.

3. There was a growth of 29,000 of discouraged workers, who were out of the labour force but reported that they wanted a job

4. Employment fell by 69,000 on the quarter but was up 24,000 on the year. Workforce jobs were down 100,000 on the quarter and down 41,000 on the year.

5. Public-sector jobs fell 111,000 on the quarter and 240,000 on the year, contrary to what Cameron falsely claimed at PMQs today. Private-sector jobs were up 41,000 on the quarter and 264, 000 on the year. This is approximately half the 500,000 jobs that Osborne recently claimed had been created under his watch. It is becoming clear, as we get more data, that most of the jobs created were under Darling's watch.

These numbers are set to worsen further and as each month goes by, it will become increasingly obvious that private-sector job creation is slowing fast. Time to own these numbers, George. Your policy is failing fast.

6. Hours picked up a little, but as I suggested in an earlier blog, the decline observed over the past couple of months was not just because of bank holidays, as David Smith recently claimed on his blog. Total hours were 914.3 million on the quarter, down from 921.3 million in May-July 2010 when the coalition took office.

7. Youth unemployment rose by 78,000 on the quarter to 973,000. Especially worrying was the rise of 35,000 of 18-to-24-year-olds on the quarter who had been unemployed for 12 months or more. The number of 18-to-24-year-olds on the claimant count for at least 12 months was also up on the month. Long duration unemployment is especially bad and shamefully, the government seems to have no policy to deal with this growing problem.

8. Wage pressure remains benign. Regular pay rose by 1.7 per cent on the month so, with inflation at 4.5 per cent, driven primarily by Osborne's VAT increase, most workers are having real pay cuts.

9. Scotland was the only region that saw falling unemployment on the quarter.

This is just the start of a flood of dreadful economic news that is expected to hit us over the next couple of months. The coalition government's economic strategy is in tatters.

Ed Balls and Ed Milband are going to have a field day with Natalie Rowe's -- aka Mistress Pain -- claims of Osborne's cocaine use and his interest in her work as a dominatrix. Talk of paddles, whips, chains and handcuffs are certainly not going to do much for his credibility, which is already in tatters as the economy tanks. Osborne's sneering is going to come back to haunt him. The Labour leader today suggested at PMQs that the Chancellor had "lashed himself to the mast. Not for the first time perhaps!"

Sadly, the coalition appears to believe that unemployment is a price worth paying. I suspect that the British people will have something to say about that.

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

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The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired the power station in 2012 and initially promised to build 517 affordable units, which then rose to 636. This was pretty meagre, but with four developers having already failed to develop the site, it was enough to satisfy Wandsworth council. By the time I wrote Up In Smoke, this had been reduced back to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls. 

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

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