Last month’s fall in UK unemployment – by 45,000 – was greeted with puzzled muttering in the media. The economic signals are so muddled that no-one knows what to make of them. According to the ONS, the economy is now shrinking again, but business surveys paint a rosier picture, prompting many economists to show cautious disbelief (See David Smith’s blog for example). The unemployment data adds to this sense that things aren’t quite as bad as the official figures make out.
But actually, the labour market has performed amazingly well almost throughout the crisis. Judging by the experience of previous recessions, many were expecting unemployment to be well above 3 million by now (10% +), but it’s stabilised at 2.5 million (8%). Basically, a lot of people, particularly in the private sector, have agreed to take pay cuts or work less and so have kept their jobs. More people are self-employed too. You would have thought this was a good thing. After all, the debt boom meant that, in essence, our economy inflated by about 5% too much. The recession has wiped this off again and the whole of the UK – banks, government, private individuals and companies – is trying to pay off the debt. This makes for very difficult times, especially if you need to raise new capital, but it could be a lot worse. Just look at Greece. The question is, is it better for lots of people to be a bit less well off, or for a minority to be completely impoverished? Listen to the unions, and they appear to want the latter. I suppose that the unemployed aren’t union members, so that’s not too surprising. But for the rest of us, and for the long-term health of society, it’s surely preferable to have underemployment that unemployment.