New figures show that the private sector isn’t making up for public sector job losses.{C}
In November 2010, George Osborne told the House of Commons that private sector job creation would “far outweigh” the job losses in the public sector. The Chancellor, an adherent of the theory of expansionary fiscal contraction, assumed that a bloated public sector was “crowding out” pirvate sector growth.
But today’s employment figures tell a different story. Osborne’s fiscal contraction has turned out to be, well, contractionary. In the last three months, 67,000 public sector jobs have been lost but just 5,000 private sector jobs have been created. The number of public sector jobs lost in the last year (276,000) now exceeds the number of private sector jobs created (262,000). As a result, unemployment has reached levels not seen for 17 years. There are now 2.64m people (8.3 per cent) out of work, including 1.03m young people. Youth unemployment is now 22 per cent, above the eurozone average of 21.4 per cent.
Over the course of this parliament, the Office for Budget Responsibility still expects private sector job creation to outweigh public sector job losses. By 2017, it forecasts that there will be 1.7 million more private sector jobs and 710,000 fewer public sector jobs. But given that the OBR has already had to raise its forecast for public sector job losses by 310,000, I wouldn’t put too much faith in those figures. If the government wants to prevent unemployment hitting three million, it should call a halt to its job cuts now.
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