UK faces jobless recovery as bosses fail to rehire

Mike Dicks, chief economist at Barclays Wealth, has warned that the structural level of unemployment in the UK could have risen as high as 8 per cent.

The treasury had hoped that the private sector would fill the employment gap left by public sector cuts. But in the IFS report, Dicks said: "A sharp labour market correction, with firms shedding workers US-style at the same time that the public sector workforce is trimmed cannot be ruled out."
 
The government's independent forecaster, the Office of Budget Responsibility, predicted that unemployment would drop to its long-term average after peaking this year.

But Dicks's suggestion is that unemployment could stagnate at 8 per cent as companies learn to operate with fewer staff in the post-recession market.

Because, unusually, unemployment did not rise dramatically in the last recession, job recovery is likely to be slower.  "If you hoard labour, you get jobless growth." Dicks explained.  

Jobless growth has already become a problem in the US, where unemployment is now at 9.4 per cent. Some economists have even suggested that trade barriers should be put in place in order to kick start domestic industry. 

Read a full report at the Telegraph.

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