Wednesday, 25 March 2009

Could 3 Million Be Possible?

For some time, I have been sceptical about the claim that unemployment could reach 3 million this year. I am now starting to entertain doubts about my view. The February figures were published last week (see report), in which unemployment rose by 138,400 to cross the 2 million mark to stand at 2.03 million. The figures contain a couple of sinister aspects.

On the one hand, the increase in unemplyment for the three months to February was 290,100. If annualised at this rate, there is every chance of seeing unemployment at 3 million this year. Equally, the rate at which unemployment is rising - the second order derivative for the really nerdy (the rate of growth of the rate of growth) - which also sets off alarms.

It is quite likely that employers had been waiting until the end of the year to see if trading conditions improve before laying off staff. Conditions haven't improved and those staff were laid off towards the end of 2008 and in January 2009, to start appearing in the figures for February. We can but hope that there is a large element of the increase that is once off, and that the rate of increase next month will fall back again.

Of course, it may not. As I write this piece on Lady Day, the quarterly rent for most commercial lets has fallen due. Poor trading conditions in the high street, along with squeezed cash flows, are likely to lead to a number of rent defaults that are much higher than usual. If so, then another twist to the downward spiral of retailing is likely to occur in the next couple of months.

There are those who believe that we are touching the bottom at the moment. Let's hope that they are right. However, from where I sit, there is still a lot of pain in system.

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