LONDON BRIEFING:The recovery spoken of in the City has been harder to spot in the real economy, writes FIONA WALSH
THE SHARPEST rise in unemployment in almost three decades is not the sort of news a government relishes publishing at all, let alone having to rush out a day ahead of schedule.
But after what the Office for National Statistics described as an “accidental early release” of key labour market numbers yesterday morning, the government was forced to release the data while many in the City were still at lunch.
The figures did not aid anyone’s digestion. After all the recent talk of “green shoots” of recovery, the data made depressing reading: the number of those out of work in the UK soared by almost a quarter of a million in the first quarter of 2009, taking the total to 2.22 million. This is the biggest increase since 1981 and takes unemployment back to where it was when the Labour government first came to power. Year-on-year, the rise is almost 600,000, taking the jobless rate to 7.1 per cent.
This is far worse than City economists, caught on the hop by the early release of the figures, had been forecasting. There was one bright spot – the April figure for those claiming jobless benefits rose by a lower-than-expected 57,000, to 1.5 million – but this was overshadowed by the rest of the data.
It included a fall of 0.4 per cent in average earnings in the year to March, their first decline since records began 18 years ago. While this was largely a reflection of the savage cutbacks on bonuses earned in the bombed-out financial sector, yesterday’s numbers underline the impact of the recession on the wider economy. Job vacancies fell, numbers of the long-term unemployed rose and the figures also revealed a big increase in young people without work.
Even employment minister Tony McNulty was unable to put a positive spin on things. “It’s very bad and very disappointing,” was his succinct verdict yesterday. And, he warned, “we’ve not reached the bottom yet”.
As if on cue, insurance group Legal General announced it was cutting almost 600 jobs in the UK, largely on its savings side. The unions say they will fight these and other redundancies and thousands are expected to gather in Birmingham this weekend to demand the government does more to protect jobs.
While many in the City of London have been seizing on supposed green shoots of recovery in recent weeks, those signs are far harder to spot in the real world. In the City, the FTSE 100 index has surged more than 25 per cent since its low point in March and a number of leading commentators have pronounced the bear market over.
The respected stock picker Anthony Bolton has dismissed suggestions that this is merely a “sucker’s rally”, saying instead that a new bull market is now under way. His optimism is shared by the legendary currency trader George Soros, who has reversed his previous pessimism to declare the economic freefall at an end.
There has certainly been some evidence, if not of recovery, then at least of a slowdown in the rate of decline. The Organisation for Economic Cooperation and Development (OECD), which has a track record of calling these things right, has suggested the worst of the recession may now be over in the UK, as well as in Italy, France and China.
Other news seized on by the economic optimists include a pick-up in activity in the moribund British housing market, with estate agents – which have been closing their offices at the rate of one a week – reporting more inquiries from new buyers in April than at any time in the past 10 years. On the high street, too, sales recovered sharply last month, rising at their fastest pace in three years.
However, it is hardly surprising that after the severity of the downturn there should be signs of a bounce-back. Demand has built up after the inactivity of the past year, but, particularly with unemployment heading for three million and beyond, can it be sustained? For every encouraging sign, there’s a fresh cause for concern – just look at yesterday’s unemployment figures. We’ve all been living with the gloom for so long now that counting the green shoots of recovery has become almost an obsession. There’s nothing wrong with that – the recovery will eventually come. But we should remember that a slowdown in the rate of decline is not the same thing as a return to growth. The timing of that remains as uncertain as ever.
Fiona Walsh writes for the
Guardian
newspaper in London
