UK jobs market figures show impact of first phase of credit crunch

Official labour market figures published earlier today by the Office for National Statistics (ONS) provide further evidence of the strength of the lagged effect of the first phase of the credit crunch. But John Philpott, Chief Economist at the Chartered Institute of Personnel and Development (CIPD) says the shockwave from the second phase of the crunch this autumn is yet to show up fully and will be stronger still.

Dr Philpott comments:

ìThe UK just waved goodbye to a decade long flirtation with full employment. Todayís jobs figures would be considered dire if it were not for the fact that last monthís figures were even worse. But these figures, which take unemployment to an 11 year high, are bad enough and will sadly be followed by further bad news in the coming months.

ìWe saw the first phase of the credit crunch emerge in autumn 2007 but it has taken time for the shockwave to hit the jobs market. Worryingly, just as the impact was being felt, this autumn saw the second phase detonate with even greater negative effect on employer and consumer confidence. The shockwave from this second phase lies ahead and is likely to be stronger still.

ìTodayís figures show the extent of the underlying deterioration in labour market conditions, with vacancies down and redundancies up as well as evidence of falling employment and rising unemployment. Of particular concern is that unemployment is now being driven up by a combination of people joining the dole queue and fewer leaving – demonstrating that firms are sharply cutting back on recruitment as well as sending more people away with their P45s. More people in work are feeling insecure, and more people already without work are experiencing the pain of long-term joblessness. As a result todayís separate good news from the DWP on numbers of people leaving welfare benefits in the year to May could prove to be short-lived.

ìAll but a handful of regions suffered a fall in employment in the latest quarter while all have seen a rise in unemployment. Employment has fallen for all age groups except those above state pension age for whom the strong employment growth of recent times has slowed to a near standstill.

ìClaimant unemployment above 1 million by Christmas is now a dead cert, as is unemployment at least above 2.25 million on the governmentís preferred survey based measure by next spring at the latest. It is still the CIPDís expectation that, depressing as todayís news is, the jobless total will eventually peak at somewhat below the near 3 million mark reached in the 1990s recession. But too many more sets of figures like todayís, plus the likelihood of many more job cuts to come, and even relative optimism will start to evaporate.

ìIn view of the worsening jobs crisis it is time for policy makers to ëthrow everything but the kitchen sinkí at the problem. We need more coordinated international policy action and further cuts in interest rates. We also need UK politicians to stop quibbling over which party has the best tax and spending plans and agree on a package of measures combining elements of cuts in income tax, reductions in taxes on spending, and financial incentives to encourage employers to recruit and retain staff.î