According to John Philpott – chief economist at the Chartered Institute of Personnel and Development (CIPD) – we’re only at the beginning of what will be the darkest period for jobs since at least the early 1990s.
Dr Philpott told SMT Online: “As the CIPD expected, these ONS figures show that unemployment stayed below two million in the three months to November 2008. That barrier will not have been broken until December. Examined ‘in the round’, the ONS figures confirm that the labour market had already slid into recession by November.”
The learned Philpott added: “Unemployment rose to 6.1%, well above the rate the economy can safely sustain when it’s growing at normal capacity. This indicates that, on top of having to ensure fast-rising unemployment, we’ve also entered a period when the rate of growth in average earnings will begin to fall.
“The autumn saw a surge in redundancies even before the spate of widespread job cuts that started to hit the headlines this month. This is in line with the CIPD’s expectation that the total level of redundancies will reach 300,000 in the first quarter of 2009, with the economy set to shed at least 600,000 jobs overall during the course of the year.”
Every sector affected by the downturn
“For the first time in this downturn, every sector of the economy registered a fall in vacancies,” explained Philpott. “With more employers across a variety of sectors placing staff on short-time, there has been the first noticeable fall in working hours since the start of the downturn. Full-time workers have been hit hardest, with full-time women workers faring less well than their male counterparts. However, women overall have benefited from the increased availability of part-time jobs.”
Philpott proceeded to state: “Although it’s too soon to be certain, this also looks to be a jobs recession that is favouring the over-50s ahead of younger people. This may be because employers are implementing recruitment freezes more widely than in previous recessions, which disproportionately hits people entering the labour market.”
In conclusion, Philpott explained: “Overall, today’s figures confirm that the labour market was in recession before the turn of the year. Unfortunately, the worst of this jobs crisis is yet to come.
“We’re entering the dark days, and should be prepared for a depressing period when – as in the recessions of the 1980s and 1990s – the benefit claimant count will rise by more than 100,000 each month. Even based upon the most optimistic of scenarios, around one in every ten people will be unemployed by the time the jobs recovery begins.”
Not as bad as first feared
Also commenting on today’s labour market statistics, Ian Brinkley – associate director at The Work Foundation – said: “Today’s figures are undoubtedly bad, but perhaps not as bad as might be feared at this stage of a deepening recession. As expected, unemployment is rising very sharply – up by 130,000 in the three months to November on the ILO measure to stand at 1.9 million.”
Brinkley continued: “The unemployment rate of 6.1% compares with 5.2% towards the end of last year. By next month, ILO unemployment will almost certainly move past the two million mark. Some 80,000 more people are now claiming Job Seekers’ Allowance. That represents a huge challenge for JobCentre Plus, and indeed the benefits system as a whole.”
As far as Brinkley’s concerned, the surprise in these figures comes from the fact that employment overall seems to be holding up quite robustly, falling by a ‘mere’ 26,000. “There are still 29 million people in work,” he said. “The best explanation is that this looks like a temporary blip in the progress of the recession. It could be that employers are adjusting by cutting hours or pay rather than shedding jobs altogether so as to avoid losing the longer-term advantage of skills and experience. Bear in mind that part-time work is also on the increase.”
So far, people are staying in the labour market rather than dropping out and becoming economically inactive. Jobs are still being generated. For example, there were still over 500,000 unfilled vacancies in the three months to December 2008 (albeit vacancies are falling). “However, we should expect job prospects to worsen markedly very soon,” suggested Brinkley. “The number of people wanting jobs is going up faster than is the number of jobs available.”
Thus far, the Government has focused its attentions on the financial end of the economy, aiming to kick-start credit movement again. “It needs to think more imaginatively and boldly about how to address the problems of the real economy,” urged Brinkley.
Three key measures would be helpful
“The Government should give further thought to a short-time working programme. This would support employers in avoiding redundancies by enabling them to cut hours, with the State able to step in and supplement a proportion of the lost wages through the benefits system.”
The massive rise in claimants that is coming in 2009 will severely test JobCentre Plus. Maintaining the quality of the service for job seekers must be a political priority, particularly given the ambitious targets for welfare reform currently in place. Stated Brinkley: “A significant increase in financial support in addition to that announced in the Pre-Budget Report is likely to be needed.”
The Pre-Budget Report gave GB pound 3.5 billion worth of support to public works. There’s an urgent need for a much more serious public investment programme. As far as Brinkley’s concerned: “This should be targeted at infrastructure projects that can be set up quickly and so stimulate local labour markets. Social housing projects are a good example.”
