UK caught in downward spiral as unemployment rises

Jan 18, 2012

Cameron could become third Tory PM in 30 years to preside over a nation of three million unemployed

THE LATEST jobless figures from the Office for National Statistics (ONS) make for grim reading. Unemployment in Britain stands at a 17-year high of 2.685 million after rising by 118,000 in the three months to November – from 8.3 per cent in the previous quarter to 8.4 per cent. That's the highest since the summer of 1994. Commentators have blamed the coalition's austerity policies for the rises and warn the economy could be entering a dangerous spiral.

Few crumbs of comfort

There are few crumbs of comfort in the latest figures from the labour market, says Hugh Pym on BBC News. The figure for those claiming benefits rose only marginally, suggesting this narrower measure of unemployment may be flattening out. But the overall fall in the employment rate "underlines a gloomy picture".

Paying the price for low inflation

Our economy is being starved of demand, Daniel Knowles blogs for The Daily Telegraph. "The export recovery the Government was counting on has simply not materialised." It's not clear what can be done about that. George Osborne's tight fiscal stance has bought us much needed credibility, but he is "paying for low inflation with unemployment".  
Economy in downward spiral

The coalition isn't working, blogs Larry Elliot for The Guardian. That's the glaringly obvious conclusion from the latest poor set of figures for the labour market. And worse is yet to come with "carnage in the high street" and the worsening eurozone crisis.
Unemployment creates its own vicious cycle, adds Elliot. People have less money to spend and demand falls across the economy. There is no immediate reason why this vicious cycle should be broken. "On current trends, David Cameron will be the third Conservative prime minister in the past 30 years to preside over a nation that has three million people officially unemployed."

It's bound to get worse

The other bad news is that history shows that when unemployment reaches the current level it has always shot much higher, blogs Faisal Islam for Channel 4. George Osborne will have to buck history to prevent unemployment of 10 per cent plus.

I'm not saying that history necessarily repeats itself, adds Islam. But the "consumerist, confidence-sensitive nature" of the UK economy could well lend itself to a domestically generated demand spiral arising from unemployment itself. "We may be beginning to see some of this in the retail sector. When it reaches housing, and house prices, the spiral has become rather messy."

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