Friday, 22 May 2009

Are We Seeing Green Shoots?

Life has kept me busy over the past couple of months, but I have still been watching for news that gives an idea of how the economy is doing. In March, we were concerned that unemployment may actually reach 3 million by the end of the year (see post). It now appears that our worst fears might have been misgiven.

After a rise in unemployment of 138,400 in February, unemployment has increased by 62,900 in March (see report) and by 57,100 in April (see report). This would indicate that the pace of the increase in unemployment is slowing. If the pace continues at an increase of 60,000 per month, then unemployment will reach 2.75 million by December. Each one of these statistics is a tragedy in itself, but not quite as bad as the doomsters have been forecasting.

There is a possibility, however, that we shall witness a 'double dip' recession. If so, then we may be currently experiencing that false recovery after the first recessionary impact. If this is the case, then the pace of the increase in unemployment may accelerate over the summer. Let us hope that this is not so.

We also ought not to assume that recovery, when it comes, will entail an uptick in employment. It is entirely possible that we could experience a 'jobless recovery', where business improves, but fewer new staff are taken on. To a certain extent, we ought to porepare for this if there presently is a great deal of slack in the economy - 'hidden unemployment' within organisations.

Let us hope that we are witnessing the start of the full recovery. That is certainly what the financial markets seem to be saying.

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