The unemployment figures are a disturbing trend
Extrapolation of historical trends is a calamitous and disastrous folly under most circumstances, which I try to avoid. However I could not help but notice some disturbing trends in the unemployment data for Britain.
The rate has crept up to 8.4 per cent in the past few months. Before June it had been pretty much bang on stable at 7.9 per cent for two years. The last year of the Labour government, and the first year of the Coalition. Something in the economy changed in June, which marginally predates the blow-up in the euro crisis.
I am constantly looking at the stubbornly low vacancy figures, particularly the historical collapse in vacancies at smaller businesses. I’m not at all optimistic.
My fear arose from looking at the historical figures for the Labour Force Survey. Unemployment has risen up to 8.4 per cent in two phases in the life of the LFS, early 1981 to September 1988, and then mid 1991 to late 1995. On both occasions, once it got above 8.4 per cent it surged over 10 per cent, reaching nearly 12 per cent in 1984, and 10.7 per cent in 1993*.
Basically put, history shows that when unemployment reaches today’s level it has always shot much higher. We are at the point where unemployment spikes. George Osborne will have to buck history to prevent unemployment of 10 per cent plus.
Any statistician will no doubt point out the pattern I have identified here is spurious. But frankly this type of insight is no less credible than the official forecast from the George Osborne-created OBR, that unemployment will peak at 8.7 per cent this year before falling by a million.
The consumerist, confidence-sensitive nature of the UK economy could well lend itself to a domestically generated demand spiral arising from unemployment itself. We may be beginning to see some of this in the retail sector. When it reaches housing, and house prices, the spiral has become rather messy.
Whilst I’m not saying that history always repeats itself, if I ran a company or a political party, it would be rather sensible to make contingencies for unemployment back above 10 per cent.
* It’s worth noting that we have only had LFS at 8.4 per cent or above under a Conservative Prime minister. Equally interesting, is that unemployment at or above 10 per cent does not lose the Conservative Party elections.
No doubt the Tories would point to the correlation of Labour governments and high public sector deficits. But the political economy of this is rather interesting. The concentrated pain of high unemployment on a section of society has not actually been an electoral death knell more generally.
Britain does not vote parties out of office for very high rates of unemployment.