Thursday, 23 July 2009

Are We Anywhere Near 3 Million?

The jobless total for June was published recently (see story). It was another dismal month – unemployment rising to 2.38 million – but contains cause for hope. We remain on course to see unemployment of less than 3 million at the end of this year. If we chart the rise in unemployment for the first half of this year, the figures are:

Month

Rise In Unemployment

January

73,800

February

138,400

March

62,900

April

57,100

May

39,000

June

23,800

Monthly Average

65,834

Just suppose that unemployment continued to rise at this average rate for the remainder of the year. It would imply that the total unemployment for the year would rise to 2.77 million – higher than our original forecast of 2.50 million (see note), but lower than the projection of 3 million reported in the previous post.

Of course, this assumes that we see a double-dip recession of the severity of the one experienced last spring. We may do so with the possible onset of a debilitating swine flu pandemic. The potential GDP loss is rising as the press becomes more alarmist about the potential impact of a pandemic. Estimates vary, from between a loss of 3% of GDP (things get as bad as the first quarter of the year) and 6% of GDP (things are twice as bad as last winter). The lower estimate seems plausible whilst the upper estimate seems fanciful. However, good futuring requires us to consider what might happen if we do not experience a double-dip recession. What would happen if the ‘recovery’ continued at the present rate?

Unemployment has been growing at a slower rate in recent months. Since March (the turnaround point), the growth in unemployment has been falling by an average of 13,033 (call it 13,000) per month. If we apply this rate of slowing to our progression, then total unemployment will peak in August, and will end the year at 2.25 million. This seems to be unduly optimistic, given the mood of the country at the moment. However, given the relatively small numbers involved – 13,000 workers in a workforce of 29 million – it is not entirely unimaginable.

Where does that leave us? We currently can envisage two predominant scenarios. One in which the UK goes back into recession, in which case unemployment could rise to 2.77 million by the end of the year, and one in which the current improvement continues, in which case unemployment could stabilise at 2.25 million at the end of the year. In the coming months, we need to monitor the progress of the economy to see which possibility will actually occur.

BBC NEWS Business Record rise in UK jobless total

http://eufo.blogspot.com/2009/01/on-to-3-million.html

2 comments:

Hervé Musseau said...

What do you expect of the month of September, when young people come in droves looking for a job after the summer vacations? In France, unemployment is expected to skyrocket even more.

Stephen Aguilar-Millan said...

Dear Herve,

In the UK we cook the books. Young people are guaranteed a training place if they cannot find a job or if they do not continue with their studies.

As there is an alternative open to them, they are not entitled to unemployment benefit - the definition of 'jobless' in this series.

There may be a small uptick in September, but I'm not sure that it will be that large. A greater effect will be University graduates, who enter the workforce (and are generally entitled to benefit) in July.

Thanks for your note,

Stephen