Job figures are horrendous but hardly a surprise

This was always an ideological attack on the state and the young are going to have to pay.

The ONS data release on the labour market this morning was horrendous. Unemployment jumped to 8.1 per cent, up 0.4 per cent on the quarter. The total number of unemployed hit 2.57 million, which is the largest quarterly increase since the three months to July 2009. Nearly 900,000 have been unemployed for at least a year and 425,000 for at least two years. The unemployment rate is now in double digits in the north east (11.3 per cent) and in London (10 per cent).

The number of people in employment aged 16 and over fell by 178,000 on the quarter and by 47,000 on the year to reach 29.10 million. This is the largest quarterly fall in the number of people in employment since the three months to July 2009.

The number of people working part-time fell by 175,000 over the quarter to reach 7.78 million. This is the largest quarterly fall in the number of part-time workers since comparable records began in 1992. Inactivity was also up and wage growth remains benign.

Most worrying was the rise in youth unemployment, which is now at 991,000. Next month, it surely will hit the million mark, as the cohort who left schools, colleges and universities fail to find jobs. Plus, of the 17,000 increase in the claimant count, 9,900 was among 18-to-24-year-olds.

The youth unemployment rate was 21.3 per cent over the three months between June and August 2011, an increase of 1.6 per cent on the previous quarter. Worst of all, a quarter of a million youngsters under the age of 25 have been unemployed for at least a year. Long spells of unemployment while young can create permanent scars.

The rise in youth unemployment is hardly a surprise, given the government abolished the Future Jobs Fund and the Educational Maintenance Allowance and reduced the number of university places. This coalition appears to be dead set on creating a lost generation. I first started warning that this was coming in 2009 and the Labour government responded and successfully got youth unemployment down, so the blame for the rise rests entirely at the coalition's door.

Interestingly, the ONS also reports an alternative measure of youth unemployment. This measure, which was introduced in its April 2011 data release, measures the youth unemployment rate "excluding people in full-time education". According to this measure, there were 721,000 unemployed 16-to-24-year-olds between June and August 2011.

This alternative measure of youth unemployment was introduced by ONS back in Spring 2011 in response to pressure from the Secretary of State for Work and Pensions, Iain Duncan Smith, who argued that this was the most appropriate measure to focus on. Youth unemployment among 16-to-24-year-olds increased by 74,000; the number of unemployed who were not in full-time education increased by 78,000.

Yes, that's right; it increased by 78,000. Unsurprisingly, we have heard little on this measure today.

In response, the Employment Minister, Chris Grayling, said:

It is clear that we are seeing the effect of the international economic crisis on the UK labour market. That's why, last week, we announced the right-to-buy housing scheme to support growth and today we are offering more support for jobseekers as sector-based work academies come on stream, combining real training, work experience and a guaranteed interview. Our new work programme is now up and running and offers people who have lost their jobs flexible, tailored support to get back into jobs and stay there.

I guess Grayling has to blame somebody but his comments are not credible. Unemployment is rising because of the government's failed austerity programme, plus a front-loaded public-sector job cull. Take responsibility -- tailored support doesn't work when there aren't any jobs. Guaranteed interviews will not work when, according to your data, there are 2.5 million unemployed and only 500,000 vacancies.

The work programme is already an expensive failure because there is insufficient demand in the economy, simple as that. Feeble excuses don't wash.

This inept coalition has no strategy for jobs or growth and its austerity plan is lowering growth fast and destroying jobs, as I have been warning for a while. This is as good as it gets, because unemployment is expected to rise inexorably from here for many more months and, based on current policies, it is hard to see where it stops.

George Osborne and his team believed in expansionary fiscal contractions, which mean that cuts in public spending allow the private sector to blossom. There was no believable empirical evidence to support such a contention and it hasn't worked.

I understand from my sources that cabinet members are close to panic as they have no idea what to do now -- the slowing economy has taken them entirely by surprise.

This was always an ideological attack on the state and the young are the ones who are going to have to pay.

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

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How the Conservatives lost the argument over austerity

After repeatedly missing their deficit targets, the Tories can no longer present spending cuts as essential.

“The age of irresponsibility is giving way to the age of austerity,” declared David Cameron at the Conservatives' 2009 spring conference. Fear of spending cuts helped deny his party a majority a year later, but by 2015 the Tories claimed vindication. By framing austerity as unavoidable, they had trapped Labour in a political no man's land. Though voters did not relish cuts, polling consistently showed that they regarded them as necessary.

But only two years later, it is the Conservatives who appear trapped. An austerity-weary electorate has deprived them of their majority and the argument for fiscal restraint is growing weaker by the day. If cuts are the supposed rule, then the £1bn gifted to the Democratic Unionist Party is the most glaring exception. Michael Fallon, the Defence Secretary, sought to justify this largesse as "investment" into "the infrastructure of Northern Ireland" from "which everybody will benefit" – a classic Keynesian argument. But this did not, he hastened to add, mean the end of austerity: "Austerity is never over until we clear the deficit."

Britain's deficit (which peaked at £153bn in 2009-10) was the original and pre-eminent justification for cuts. Unless borrowing was largely eliminated by 2015, George Osborne warned, Britain's public finances would become unsustainable. But as time has passed, this argument has become progressively weaker. The UK has cumulatively borrowed £200bn more than promised by Osborne, yet apocalypse has been averted. With its low borrowing costs, an independent currency and a lender of last resort (the Bank of England), the UK is able to tolerate consistent deficits (borrowing stood at £46.6bn in 2016-17).

In defiance of all this, Osborne vowed to achieve a budget surplus by 2019-20 (a goal achieved by the UK in just 12 years since 1948). The Tories made the target in the knowledge that promised tax cuts and spending increases would make it almost impossible to attain – but it was a political weapon with which to wound Labour.

Brexit, however, forced the Conservatives to disarm. Mindful of the economic instability to come, Philip Hammond postponed the surplus target to 2025 (15 years after Osborne's original goal). Britain's past and future borrowing levels mean the deficit has lost its political potency.

In these circumstances, it is unsurprising that voters are increasingly inclined to look for full-scale alternatives. Labour has remade itself as an unambiguously anti-austerity party and Britain's public realm is frayed from seven years of cuts: overburdened schools and hospitals, dilapidated infrastructure, potholed roads, uncollected bins.

Through a shift in rhetoric, Theresa May acknowledged voters' weariness with austerity but her policies did not match. Though the pace of cuts was slowed, signature measures such as the public sector pay cap and the freeze in working-age benefits endured. May's cold insistence to an underpaid nurse that there was no "magic money tree" exemplified the Tories' predicament.

In his recent Mansion House speech, Philip Hammond conceded that voters were impatient "after seven years of hard slog” but vowed to "make anew the case" for austerity. But other Tories believe they need to stop fighting a losing battle. The Conservatives' historic strength has been their adaptability. Depending on circumstance, they have been Europhile and Eurosceptic, statist and laissez-faire, isolationist and interventionist. If the Tories are to retain power, yet another metamorphosis may be needed: from austerity to stimulus.

George Eaton is political editor of the New Statesman.

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