Wednesday, 11 February 2009

Unemployment statistics disgrace

It has been announced that unemployment has risen to 1.97m, the highest in 12 years since Labour came to power, adding increasing gloom over the economic outlook.

The total rose by over 130,000 last month and represents 6.3% of the economically active workforce.

How hard the statisticians and bureaucrats had to work to massage these 'official' figures in order to keep them below the psychologically important 2m figure is beyond me, but it is completely wasted effort as they will surely bow to the inevitable next month if Ed Balls is to be believed when he softened up our expectations earlier this week.

The greater problem is the credibility of the ONS in the first place - after all, what is the point of having a reporting facility if it is debased by dishonest reporting? You might as well ask Sheila in the Post Office how things are going, except that the government has closed it down.

It's the same problem with inflation.

While at the Treasury Gordon Brown changed the measurement from CPI to RPI and thereby excluded things like monthly mortgage repayments from calculations of the national inflation figure. This meant inflation was reported at far lower levels than were experienced by mortgage-holders and helped contribute to the housing market boom... and we know where that got us.

Financial reporters have now countered this political manipulation by reporting on the different figures, as can be seen here.

So following on from the further reduction in interest rates last week, it is predicted that a zero interest rate could be on the cards as the Labour government enters panic territory in the search of economic good news ahead of a general election.

Instead of looking at Ed Balls and seeing a put-up job by his mentor and boss, maybe we should see criticism in the warning and a play for the leadership.

Still, I'm not certain any politician would be well-advised to take over from Brown if interest rates go any lower, as the only policy option left on the table at that point would be an inflationary policy of 'quantative easing' - at a time when a banking crisis, a credit crisis and a liquidity crisis are all combining with rising unemployment and falling consumption - could be a policy choice which actually creates the depression of the century.

So whichever way it can be looked at pain will have to be borne, either today or in greater quantities tomorrow.

And I'd rather resist the impulse to set off the chain reaction which will lead to a third world war, thank you very much.

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