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Unemployment: what the economists say

Guardian Economics 15th July 2009

Experts warn there is no evidence unemployment will start falling soon, after today's figures showed a record rise to 2.38 million

Ross Walker of Royal Bank of Scotland

"I can't take much encouragement in the smaller rise in jobless claims [up by 23,800 in June] when the economy is shedding so many jobs. I don't think we're going to see any significant improvement in this data any time soon. Maybe the pace of layoffs could begin to moderate towards the end of this year but I think we're still going to be seeing job losses well into next year."

Philip Shaw, chief economist of Investec

"The claimant count figures are better than expected but the big caveat is that the ILO (International Labour Organisation) series has risen by 281,000 in the three months to May [to 2.38m]. It appears there is a divergence between trends in the two series.

"The earnings rebound is no surprise but the ex-bonus rate has slipped down a touch to 2.6%. If anything, wage trends are a disinflationary influence on the economy."

Alan Tomlinson, partner at UK insolvency practitioners Tomlinsons

"This disturbing rise in the number of unemployed reflects the rise in the number of companies going under or struggling to survive. And they are going under by the day, primarily due to unmanageable debts racked up during the good years, drastic drops in turnover and the removal, or reduction, of credit facilities. There is also a feeling that real unemployment, or unemployment in the private sector, is higher than the figures reveal, but is being masked by the relative buoyancy of the public sector."

Katja Hall, director of employment policy at the CBI

"This hefty rise is in line with our forecast and reflects the tough climate that businesses face. Sadly, more and more jobs will be lost in this difficult recession and we expect unemployment to peak at three million next spring.

"Businesses and staff are doing their utmost to protect jobs, and in many firms we have seen a spirit of flexibility around pay and hours to try to limit redundancies.

"The rise in youth unemployment is particularly worrying and the government must target more help to prevent long-term damage to a generation."

Vicky Redwood of Capital Economics

"The latest UK labour market contains conflicting signals about whether conditions are getting better or worse. The claimant count measure of unemployment in June posted its smallest rise in a year. However, the wider ILO measure posted its biggest rise on record in the three months to May, of a whopping 281,000.

"Either way, we doubt that unemployment will start falling again until GDP growth has got back towards its trend rate, and that is unlikely to happen for a long time yet."

David Kern, chief economist at the British Chambers of Commerce

"These figures make grim reading and confirm our assessment that although the recession is easing, unemployment is set to continue rising at a rapid pace. On the basis of these numbers we reaffirm our forecast that unemployment will peak at around 3.2 million next year."

Howard Archer, chief UK and European economist at IHS Global Insight

"The claimant count data suggests that the rise in unemployment could be tailing off. It is difficult to reconcile the huge divergence between the two unemployment measures, but overall it is hard at the moment to be anything else than pessimistic about the labour market. It is also the ILO measure that is the broadest measure of unemployment and most comparable with other countries' data.

"True, there are signs that the rise in unemployment is currently being limited to some extent by companies and workers showing increasing flexibility in trying to avoid permanent job losses, including the use of such measures as wage freezes or pay cuts, extended unpaid leave, career breaks and going part-time.

"However, such measures can only have a limited effect in stemming job losses and it is likely that the number of unemployed still has some considerable way to rise. While the economy appears currently to be close to at least temporarily stabilising, unemployment is a lagging indicator and the extended deep economic contraction seen in the second half of 2008 and the first quarter of 2009 will continue to feed through to hit the jobs market pretty hard for some months to come.

"Furthermore, considerable doubts and uncertainties remain about the timing, strength and sustainability of any recovery. Indeed, even if the economy does manage to eke out some growth over the coming months, it is highly unlikely to be strong enough for some considerable time to come to lead to a net creation of jobs. Consequently, the economy seems set to shed jobs well into 2010 and unemployment seems more likely than not to reach 3 million."

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