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(5 months later)
Whenever they have been asked to defend their austerity programme, ministers have not had much good economic news to cite. The GDP figures veer between mediocre and dismal, the public finances are not much better and, what's more, the forecasts keep getting worse – as this week's downgrades from the IMF illustrate. Which has left the government with precious little to show that its policies are working – apart, that is, from the resilience of the labour market. Indeed, 2012 was the best year for employment growth since 2000.Whenever they have been asked to defend their austerity programme, ministers have not had much good economic news to cite. The GDP figures veer between mediocre and dismal, the public finances are not much better and, what's more, the forecasts keep getting worse – as this week's downgrades from the IMF illustrate. Which has left the government with precious little to show that its policies are working – apart, that is, from the resilience of the labour market. Indeed, 2012 was the best year for employment growth since 2000.
Which must make yesterday's jobs figures doubly alarming for the coalition. Unemployment always constitutes bad economic and political news; but these particular numbers also knock away a rather lonely-looking support for current economic policy. And make no mistake, for the first time in ages, the statistics are unambiguously grim: unemployment and youth unemployment both up – and the numbers of people out of a job for over a year steadily rising. What's more, for those in work things are pretty miserable: the average employee is now seeing his or her pay rise at an annual rate of just 0.8%. Inflation, as measured by the retail prices index, is 3.2%. In other words, workers are seeing their real pay fall by 2.4% a year. The Office for National Statistics notes that this is the slowest nominal-wage growth it has seen since its records began in 2001 – and obviously lower even than in the depths of the banking crisis.Which must make yesterday's jobs figures doubly alarming for the coalition. Unemployment always constitutes bad economic and political news; but these particular numbers also knock away a rather lonely-looking support for current economic policy. And make no mistake, for the first time in ages, the statistics are unambiguously grim: unemployment and youth unemployment both up – and the numbers of people out of a job for over a year steadily rising. What's more, for those in work things are pretty miserable: the average employee is now seeing his or her pay rise at an annual rate of just 0.8%. Inflation, as measured by the retail prices index, is 3.2%. In other words, workers are seeing their real pay fall by 2.4% a year. The Office for National Statistics notes that this is the slowest nominal-wage growth it has seen since its records began in 2001 – and obviously lower even than in the depths of the banking crisis.
Such poor figures show how meaningless it is to talk of double- or triple-dips. At this stage after a recession, the labour market is normally adding jobs and workers are seeing their wages go up. Not in this slump: the median employee is now being paid over 10% less than they were in 2008. As a new paper from Stirling University points out, the unemployment figures mask a problem of underemployment: part-time workers who would go full-time if there were only the jobs; the self-employed who are barely getting any custom; and full-timers who can't manage on their falling incomes. This will probably be the theme of this parliament: not post-recession boom, nor post-austerity bust – but a grinding slump.Such poor figures show how meaningless it is to talk of double- or triple-dips. At this stage after a recession, the labour market is normally adding jobs and workers are seeing their wages go up. Not in this slump: the median employee is now being paid over 10% less than they were in 2008. As a new paper from Stirling University points out, the unemployment figures mask a problem of underemployment: part-time workers who would go full-time if there were only the jobs; the self-employed who are barely getting any custom; and full-timers who can't manage on their falling incomes. This will probably be the theme of this parliament: not post-recession boom, nor post-austerity bust – but a grinding slump.
This has been a terrible week for George Osborne, as would be more apparent in a quieter period. After months of subtly disagreeing with the coalition's cuts, the IMF this week went full-frontal and called for a plan B: "It may be time to consider adjustment to the original fiscal plans." Couple that with the discrediting of a study much cited by the Treasury that argued that high debt produced slow growth. This chancellor's austerity increasingly lacks for intellectual credibility, influential friends and empirical supp ort. This is quite a state for Mr Osborne to arrive at less than three years after taking office.This has been a terrible week for George Osborne, as would be more apparent in a quieter period. After months of subtly disagreeing with the coalition's cuts, the IMF this week went full-frontal and called for a plan B: "It may be time to consider adjustment to the original fiscal plans." Couple that with the discrediting of a study much cited by the Treasury that argued that high debt produced slow growth. This chancellor's austerity increasingly lacks for intellectual credibility, influential friends and empirical supp ort. This is quite a state for Mr Osborne to arrive at less than three years after taking office.
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