Thursday, 18 February 2010

January Jobs

This article from The Economist caught my eye.

Now (apart from criticising the word order as ungrammatical), the unemployment rate of 7.8% in January - representing a 50% rise since the first inklings of the credit crunch - is a matter of big concern.

12 months ago I noted how the rise in unemployment to 6.3% in the same post-Christmas period stank of officials trying to keep the figure under the psychologically-important 2m mark, but it seems the pressure of publicity has been swept away as it becomes clear there is a real and urgent economic price to be paid which could slow any recovery.

With inflation returning in the form of fuel rises and the end of the VAT holiday, the potential downgrading of gilts, an ongoing if gradual currency devaluation and other economic woes piling up as the price of the massive debt crisis hits home, the lull in unemployment rises may be seen as good news for the government.

But the desperation for good news and talking up the positives at the expense of realism quickly leads to delusion and disillusion, so I'm not so sure.

I tend to agree with The Economist that wage inflation will be harder to contain this year than last, making decisions about new hires less easy as companies seek to gain greater value.

So, with a tentative statistical recovery on the back of a massive state stimulus, are we headed for a period of stagflation to pay for the fiscal policy errors under Labour?

If that does turn out to be the case then we only have to look back to the 1970s to see that winning elections is not the most desirable political strategy - as it is always the incumbent who takes the blame for current economic conditions (attacks on house repossessions during the 'tory recession' of the early 1990s only stuck because the recovery was complete by 1997 when Blair entered Downing Street).

A significant portion of Labour support has already turned against the growing economic inequality they have overseen, as they're shown to have failed according to their own terms.

But it will undoubtedly cause headaches for a possible Conservative government post-election too, just as it did for Thatcher pre-Falklands - so you have to wonder what kind of trick providence has got hiding up her sleeve, because it is impossible to believe Cameron is either as far-sighted or as cynical to manipulate circumstances to his advantage in the same tub-thumping manner as the grocer's daughter and her press acolytes!

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