We are sorely short of workers, and putting a load of them on unemployment will not help | Philippe Inman
A The recession is already upon us and could last through next year and beyond, according to the Bank of England. It’s a grim outlook, tempered only by the Bank’s Monetary Policy Committee signaling that the downturn is unlikely to be as severe as expected, despite its jolt to mortgage payers last week with a 0.75 point increase. percentage of base rate.
Interest rates will peak at a level lower than the 5.25% previously expected by financial markets – somewhere between 3% and 4% – which means that the recession, rather than being the longest in 100 years, will be short and shallow.
In a way, it is embarrassing that the UK economy could be pushed into a recession by low interest rates. But that’s what happens when your growth engine generates the same power – and has the same reliability – as an Austin Allegro.
The Bank’s weak outlook is in line with most industry surveys, which show the UK is not contracting as much, at least not in a way seen in previous recessions, as stagnating.
The labor market symbolizes malaise, appearing both unhealthy and hopelessly in bad shape. Most people who want a job and can do it have a job. It may not be the best job or the one they’ve always wanted, but they have one.
Tory MPs, under pressure to explain why 12 years of Tory policies have done nothing to improve the economic outlook, regularly repeat the unemployment rate, which is at its lowest level since the 1970s.
To counter the misleading message of this simple statistic, a report released later this week will show how unemployment is artificially depressed by the large number of people who are no longer looking for work, because they are sick or so tired that they have took early retirement.
The report is the launchpad for a new commission on the future of job aid, which will bring together “experts from business, public services and civil society to develop a blueprint for reform”.
Like many commissions, it could write its conclusions within a few weeks given what is known of the government’s failings and the measures needed to improve the situation. But he needs to show he’s considered all options, so it may be a few months before his findings see the light of day.
Interestingly, the initial report shows how the UK has experienced “one of the worst jobs recoveries in the world, fueled by a shrinking workforce and a lack of access to employment support. ‘effective employment’.
Sponsored by the Institute for Employment Studies (IES) and the charity arm of fund manager abrdn, the report says a finding from earlier this year still stands – that the UK is almost unique in the world for the number of employees below pre-pandemic levels. The recovery is the third worst in the developed world, behind Latvia and Switzerland.
As our government scrambles to find an answer, the report says Latvia and Switzerland are improving rapidly. “At the start of next year, the UK is likely to be the only country in the developed world with a lower employment rate than in 2019,” the report said.
The results are much broader and more detailed than can be discussed here, but with the Bank of England saying the main reason it needed to raise interest rates was a lack of workers, they are important to the debate over the economy.
Last week, it became clear that interest rates were not raised to combat the inflation generated by the high price of energy on world markets. The main reason is to create a recession that will put 500,000 people in the benefit queue and thus undermine those demanding higher wages.
Raising wages to offset higher inflation is the “second-round effect” that central bankers say needs to be stopped, otherwise businesses will have to raise prices, creating more inflation. Only a rise in unemployment can sap people’s appetite for a wage showdown.
Except, as IES chief Tony Wilson has spent much of the past year trying to persuade ministers they could increase the labor supply by bringing the 500,000 or no longer looking for work.
Endless Tory infighting means no changes have been made to the way Britain treats those who want to work but find they can’t or need a soft reintroduction after having Covid, or because they are over 50 and, like many millennials, have reconsidered handing over their time and mental well-being to a slave employer. Brexit, of course, made this bad situation worse.
The Sunak/Hunt budget will not provide an answer. Like the Bank of England, it will follow the miserable path we are all on – towards stagnation.