Contraction in employment is what matters

Last Sunday I asked whether the downturn in the labour market could become a jobs rout? The release of the latest jobs figures for the UK economy confirms what we probably already know - that the economy is already in a recession and that 2009 will be a very difficult year for businesses across the length and breadth of the country.

The media have played heavily on the unemployment figures including a rise in excess of 150,000 over the last three months in the LFS measure. But to my mind what is more significant is that total employment looks to have turned a corner - a cross-over if you will between the number of new jobs being created (most of which never make the news headlines) and the redundancies and jobs lost from plant closures which are the staple of the regional news broadcasts.

In the last recession, total employment fell by two and a half million. And in a flexible labour market and when credit is not easily available to keep a business running in difficult times, the time lag between the rate of GDP growth slowing and jobs being lost is shortened considerably. Officially annual GDP growth remains positive but already the numbers of short term unemployed (out of work for less than six months) is rising at a steep rate.

Fewer jobs, less vacancies, worsening job expectations and fragile job security. For a generation used to persistently low unemployment, a heightened awareness of just how weak the jobs market is likely to become is likely to impart another negative shock to confidence and demand - similar to the housing market collapse. Will we see thousands of Britons looking for work overseas? And will a slackening of demand for people in the UK have a further impact on the net flow of migrant workers from Eastern Europe and beyond?

I have attached a fresh PowerPoint file incorporating today’s employment data.

UK_Unemployment.ppt