Unemployment in UK more likely to hit 3 million than 2 million in next year.

 

The outlook for UK unemployment is grim.

Large public sector redundancies are expected as the Government sets about cutting departmental budgets by between 25 and 40 per cent by the end of the Parliament. The Office for Budget responsibility has estimated that this fiscal squeeze is going to cost around 490,000 public sector jobs. Let’s hope they deal with the “sickies” culture as part of the stable cleansing.

 

Public sector employers and unions should learn from the experience of the private sector in managing reduced budgets. Flexible working, reduced hours and, of course, wage restraint will help cushion the blow. But realism is necessary. A significant rise in jobless is inevitable, even if the Government and the public service unions work together in complete harmony in the coming months and years. This, in itself, is an unlikely event.

 

The maintenance of labour by firms in the recession will cramp job creation in the recovery. As orders return, firms will not need to hire to meet demand. Economists are already talking about a "jobless recovery".

 

What makes the situation still more ominous is that the Government has taken a huge punt on job creation by the private sector over the coming years without much to back it up. The OBR has forecast that more private sector jobs will be created in the coming years, as confidence returns, than were created in the boom years of the past decade.

 

Why?

 

Where is the logic? – with the cuts to public spending being unprecedented, a drop in incomes in real terms, belt tightening all round leading to lower demand it is hard to believe the private sector recovery will be anywhere near as strong as forecast.

 

That said we need to hope that this optimistic forecast is correct because otherwise Britain's unemployment is more likely to hit 3 million than 2 million in the next year.