George Osborne’s economic strategy has always been predicated on the assumption that the private sector will expand as the public sector contracts. In November 2010, the Chancellor told the House of Commons that private sector job creation would “far outweigh” the job losses in the public sector.
But today’s unemployment figures show that he’s still missing his target. Last year 270,000 public sector jobs were cut but just 226,000 private sector jobs were created. Since June 2010, 350,000 of the former have been lost and 320,000 of the latter have been created (see graph).
More encouragingly for the government, in the final quarter of 2011, private sector job creation (45,000) did outweigh the job losses in the state sector (37,000), albeit by only 8,000. The Office for Budget Responsibility has forecast that there will be 1.7 million more private sector jobs by 2017 and 710,000 fewer public sector posts. It will be worth watching to see whether this optimistic prediction is revised when the new OBR forecasts are published on Budget day.