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Morning Line: Are we prepared for the job carnage to come?
The Treasury estimates that up to 1.3 million jobs may be lost over the next five years, according to reports today.
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Given that it was supposedly prepared by a panel of independent economic experts, there was much to be sceptical about in last week’s Budget forecasts.
The GDP growth estimates, for example - 1.2% this year, followed by 2.3% in 2011 and 2.8%, 2.9%, 2.7% and 2.7% in subsequent years – always appeared highly optimistic, particularly given the spluttering state of the global economy and the sharp fiscal tightening being proposed by the new government.
Certainly it is a massive gamble that there is no lurch back into recession, either here or in the global economy, and that the private sector moves in quickly and effectively to fill in the gap left by the rapid rollback of the state.
Perhaps most puzzling, however, were the Treasury’s forecasts for unemployment, which it sees as peaking at 8.1% this year, before falling back to 8.0% next year, 7.6% in 2012, 7.0% in 2013, 6.5% in 2014 and 6.1% in 2015.
Given the unprecedented level of public spending cuts being proposed by this government – perhaps as much as 25% in some departments over the next five years, given the manifesto pledge to ring-fence health and overseas aid – these numbers are particularly difficult to believe.
Can employment really hold up so well in the face of such savage cuts?
Again only in a very best-case scenario, one suspects, with a double-dip recession and second financial crisis squarely avoided and with consumer spending and private sector activity quickly picking up where it left off in 2007.
Yet even then one can’t help but feel that the planned spending cuts must wreak more damage on the employment market than is currently being acknowledged.
A front page report in today’s Guardian seems to confirm that assessment. It suggests that up to 1.3 million jobs will be lost over the next five years as a direct result of last week’s austerity budget, with up to 600,000 posts disappearing in the public sector and a further 600,000-700,000 jobs lost in the private sector.
And these figures are the Treasury’s own private forecasts, if the report is to believed, presented to the chancellor in the run-up to last week’s statement.
The headline forecasts, meanwhile – the stuff that we were given in the official budget statement - make an implicit assumption that some 2.5 million jobs will be created over the next five years, which is quite an assumption to make given the massive uncertainties still shrouding the global economy.
What do we do if there is a severe downturn economic downturn, or a major sovereign debt crisis, or even another banking crisis?
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10 comments so far. Why not have your say?
Anonymous 1 needed this 'off the record'
Jun 30, 2010 at 14:07
For goodness sake stop adopting the use of 'lazy' tabloid language, ie 'job carnage etc,' in the headings for otherwise articulate and well researched articles.
report thisAtheist
Jun 30, 2010 at 14:16
#Anonymous 1.
Whilst I agree about normal Tabloid language.
What is wrong with Carnage in this context
will it not be a "Great slaughtere of jobs"?
report thisAnonymous 1 needed this 'off the record'
Jun 30, 2010 at 17:10
Whilst a possible loss of 1.3 milion jobs over the next five years is obviously an extremely bad prospect for those affected and of great concern re the knock on affects in the wider economy, this 'throw away' use of language is clearly over the top and more appropriate to describe the levels of unemployment last seen during the Great Depression ie somewhere around 20 > 25%. At this rate there will no fitting superlatives left to describe the biggest catastophes in life in fact substitute English such as mega and awsome are already worn out through over use.
report thisAtheist
Jun 30, 2010 at 17:41
# Anonymous 1
Iknow not what your background or experience happens to be.
But you can be assured that it matters not to any person losing
their job, with no prospect of obtaining another, whether the percentage
is 5-10-20 ro more, it will feel to them like another overused word Devastation.
report thisAnonymous 1 needed this 'off the record'
Jun 30, 2010 at 19:26
I don't doubt for one moment that anyone in those extremely grim circumstances will feel devastated and it would be very understandable if they described their feelings in that way. I did not make my point in any way to 'downplay' or show any lack of concern regarding the potentially serious impact on those affected. Quite the contrary as I was simply stating a view that well researched articles, making serious points, about such serious matters, merit an appropriately measured 'bullet point' otherwise they risk being devalued by association with this style of throw away 'tabloid' banner headline . I hope this has clarified why I made the observation - it was related to the importance of the subject matter and therefore the importance of it's style of presentation.
report thisAtheist
Jun 30, 2010 at 20:15
#Anonymous 1
I respectfully accept and understand the the points you have now made.
I would suggest however, that many who later may be faced with the possible reality of the situation, may well not look so kindly upon them.
Best wishes
report thisDilip Shah
Jun 30, 2010 at 21:20
I agree that we have to get the deficit down but the flip side is with total unemployment possibly reaching 3.5m in the next 2 yrs and the economic forecast of growth on the lower side , it seems that the recipe for cooking up a double dip depression is ripe.
George Osbourne has never called or figured out the way out correctly and it seems that this Govt will roll us back 10-15 years.
Will they suggest retirement age of 70-75 years!
report thisIan W
Jun 30, 2010 at 22:41
" Some cuts were needed by any measure, certainly, but not on this scale.
To cut so much so quickly is a political act and a statement of absolute faith in Thatcherite, neo-classical economics ..."
Ahem, your left wing slip is showing again, Tony. Now just remind me what were your parties plans to tackle the deficit? Was Cameron correct that they involved 70,000 MORE public sector job losses?
report thisAnonymous 2 needed this 'off the record'
Jul 01, 2010 at 08:26
The Tax Payers contribution to Public Sector Pensions is 20%+ and if labour costs are about 50% of spending, it means pensions are costing about 10% of Public Spending.
So if you eliminated pension contributions (I know you can't get away with it all) and assuming that you are getting retirements of about 3% of the work force per year and not replacing them, that gives you 25% over 5 years.
I say let the unions fight it out, there is a fixed kitty in pound notes, nom more - you decide, jobs or pensions!
report thisBernard
Jul 01, 2010 at 15:42
References to the Great Depression are ill-informed The peak of 2,995,00 unemployed of Jan 1933 had fallen to 1,276,000 by the autumn of 1937, when 11 million in insured occupations surpassed the figure of
1929. Four million people had been absorbed or reabsorbed into industry, even in coal mining, unemployment had been cut from 40% to 18%. Agriculture flourished; the acreage under wheat rose by 44%, home-produced bacon doubled.
In the year 35-36, while local authorities built 52,000 houses, private builders produced 270,000, half paid for with money advanced by building societies to wage-earning owners, amongst them my father, who on a wage of about £150 a year bought for a little over £600 the house where I grew up; it now commands a price of around 180k. To keep the same ratio a single buyer today would need a salary of £45k
This was a time when many families had one wage-earner, for married women rarely worked outside the home - remember that female teachers, and probably women in other jobs were automatically sacked if they got married.
There were of course many areas where there was hardship and deprivation, just as there are now after 13 years of Labour government. The legend that Britain suffered appallingly under the Great Depression is a convenient quarter-truth mouthed by ill-informed politicians who worship at the shrine of JMK.
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