Thursday, 13 August 2009

The First Signs Of A Double Dip?

The July unemployment figures are something of a mixed bag. On the one hand, unemployment rose by only 24,900. This is not good for those who have been made jobless, but it does suggest that the forecasts of 3 million unemployed this year belong more and more to the realms of fantasy. On the other hand, if we accept our crude rule of thumb from last month (see post), we would have expected unemployment to rise by only 10,000 to 11,000. This deviation from trend is not insignificant, and demands our attention.

It is entirely possible that there are seasonal factors affecting this figure. In July, somewhere between 400,000 and 450,000 undergraduates would have left university to enter the jobs market. Some, if not the majority, of this increase could be explained by the increase in graduate unemployment reported elsewhere. However, there is also the possibility – one that we must take very seriously – that we are starting to see a double dip recession come into play. It is too early to say one way or the other, but this is a matter that does need to be closely monitored.

Another interesting factor coming into play is the geographical incidence of unemployment. The BBC has a really good graphic to show this (see graphic). Unemployment is now starting to become concentrated in the West Midlands, in addition to the traditional areas of high unemployment. This is not difficult to explain – the West Midlands is heavily dependent upon the automotive sector which has been hit very hard in this recession. What is interesting are the political consequences of this.

The West Midlands are a key marginal battleground politically. Margaret Thatcher won them over, to underwrite her period in office. They were won by New Labour in 1997, and have helped to keep the government in power ever since. As Gordon Brown is now seen to be the architect of the current recession, will he be able to maintain the New Labour majority in the region? I suspect that this is where the next General Election will be won – or lost.

BBC NEWS Business UK jobless total climbs to 2.4m

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