Five years of jobs deficit

A report
released to coincide with the official UK unemployment figures – concludes that
economic growth in the next few years has only to be slightly weaker than the
Office for Budget Responsibility’s (OBR) current central forecast for the jobs
outlook to look a lot worse than the coalition government hopes.

Taking into
consideration the different periods of jobs recovery in the past three decades,
the report, from CIPD predicts that the UK economy will need to grow by at
least 2.5 percent per year between now and 2015 if the private sector is to
create enough jobs to more than offset the employment impact of the impending
squeeze in public spending. Growth even slightly less than this, between 2-2.5
percent per year, would seriously diminish overall jobs prospects.

The
OBR’s current central economic and employment forecast shows the economy
growing by well over 2.5 percent each year from 2012-2015. The total number of
people in work starts to rise next year (2011) and continues to rise through to
2015, resulting in a net gain in employment of 1.3 million between 2010 and
2015. Unemployment meanwhile peaks at 8.1 percent in 2010 – close to 2.5
million on the Labour Force Survey ILO measure- and then declines to 6.1
percent (around 2 million). The CIPD, by contrast, on only slightly more
pessimistic growth assumptions, forecasts the economy will shed 300,000 jobs by
2012 before renewed job creation
boosts employment by 2015 to around 100,000 above the level in 2010 i.e. far
short of the 1.3 million extra jobs the coalition government is hoping for. On
the CIPD’s scenario the unemployment rate rises from 8.1 percent in 2010 to a
peak of 9.5 percent (2.95 million) in 2012 before falling to eight percent by
2015.

Dr John
Philpott, Chief Economic Adviser at the CIPD comments: “Against the backdrop of
massive public sector job downsizing it doesn’t require anything like a
double-dip recession to cause a serious prolonged jobs deficit, merely economic
growth in the range of 2-2.5 percent per annum rather than the +2.5 percent
(above trend) annual growth rates the OBR expects and the coalition government
is hoping for.

“A slightly
milder growth outcome – which many would consider a decent recovery in output
given the various strong headwinds at present facing the economy – is easily as
imaginable as the OBR’s central forecast and would leave unemployment still
close to 2.5 million by 2015, meaning Britain faces at least half a decade of
serious prolonged jobs deficit. So will, fiscal pain spur private sector jobs gain,
as the coalition’s economic strategy assumes? Yes, but probably not very much
and certainly not any time soon.”

12 July 2010