Real U.K. Unemployment is 5.5 million, the Jobless Economic Recovery?

Economics / UK Economy
Apr 22, 2010 - 01:15 AM

By: Nadeem_Walayat

The latest U.K. Unemployment and claimant count data released Wednesday show a confusing mixed picture which allowed both Labour and the Conservatives to broadcast election propaganda in their own favour.

U.K. Unemployment ROSE to 2.502 million for January 2010, which elevated the Jobless rate to 8%

U.K. Benefits Claimant Count (seasonally adjusted) FELL by 33,000 to 1.54 million for Feb 2010.

UK Unemployment Forecast Fulfillment

Wednesday's data completes my UK unemployment forecast as of October 2008 http://www.marketoracle.co.uk/Article6812.html (July 08 data) that forecast UK unemployment to hit 2.6 million by data released during April 2010 in advance of a May 2010 General Election as illustrated by the below graph, and against consensus forecasts by mainstream press and academic economists that ranged to between 3 and 3.4 million i.e. nearly a whole million off target!



Benefit Claimant Count has Risen NOT Fallen

Whilst the mainstream press and the Labour party are running with the claimant count figures as a positive development. However as the earlier graph illustrates there has been NO DROP IN BENEFIT CLAIMAINTS, The data that is being pushed in the press is the seasonally adjusted variety, the REAL claimant count figures have RISEN from 1.654 million to 1.657 million for February 2010 data.

UK Real Unemployment Rate is 5 million

Whilst the headline UK Unemployment data of 2.502 million has come in near 1 million below academic economist expectations. Which at 8% of the workforce is remarkably low when one considers that past milder recessions had seen UK unemployment peak at much higher levels i.e. in the 1980's at 12% and in 1990 at 10.8%, therefore on face value the Labour government appears to have achieved a minor miracle by UK unemployment peaking at only 8% in the midst of the worst recession since the Great Depression.

However, I have long questioned the accuracy and validity of the official unemployment data which over several decades and much manipulation by successive governments has been tweaked many hundreds of times to under report true unemployment for political purposes. Current official unemployment stands at 2.502 million which is against the total recorded as economically inactive of working age that stands at a new all time high of 8.159 million which illustrates the true extent of failure of the Labour government to manage the potential of the work force during the boom years as illustrated by the fact that 80% of the 2.1 million jobs created under Labour went to foreign workers and therefore did nothing to address the true level of UK unemployment that contained a hidden ticking social security financing time bomb that is now exploding.



During the Conservative boom cycle, real unemployment fell from the 1983 crisis high. However the same did not take place following the early 1990's recession where real unemployment failed to not only fall but steadily rose under Labours boom years as the benefits culture took hold and hundreds of thousands of foreign workers performed the jobs that unemployed Britain's were not prepared to do as they were far more comfortable living off the tax payer in Labours benefits culture.

Whilst not all of the 8.16 million economically inactive should be seeking work, however the figure does imply that at least 3 million of the 8 million form the core of the the benefits culture.

Therefore the 3 million that chose not to work but instead prefer to rely on tax payer funded benefits added to the official 2.5 million unemployed results in a total UK unemployment count of 5.5 million. Which is more in line with the recession experience of other similarly in-debted and structured European countries such as Spain that has an unemployment rate of 19%.

This also suggests that even if the headline unemployment rate improves over the coming months (which I expect it to do for a few months at least), the real rate of unemployment as recorded by those economically inactive will remain stubbornly higher for many years, especially in advance of the 1/2 million public sector job cuts required to shrink the budget deficit.

The £40 Billion Benefits Culture

Social security benefits cost Britain £106 billion a year, at least £40 billion of which is spent on those that could work but choose not to work. Therefore the next government needs to take urgent action to address this culture of "won't work" across Britain's housing estates which breeds generations of perpetual cradle to grave benefit claimants who's strategy is to maximise the amount of benefits they can claim which means by bringing as many children into the world for which they provide little parenting towards which results in gangs of feral youth roaming the estates and city centres generating crime, nuisance and fear amongst the rest of the population and then perpetuating the benefits culture into the next generation resulting in an ever increasing burden on the economy.



One way of getting to grips with the benefits culture is to reintroduce national service so that all youth who are not employed or in higher education are taught discipline, practical skills and the worth ethic.

Academic Economists Worthless Economic Forecasts

Academic economists that populate the mainstream press had collectively converged during 2009 into the consensus view that UK unemployment would soar to between 3 and 3.4 million by the time of the next general election (May 2010). Therefore they have proved to be wrong by nearly 1 million, and as usual without any consequences, for this or any of the other worthless projections on the economy as they still contemplate a double dip recession whilst this Friday's data will show a strong economic bounce in Q1 2010. And not forgetting yesterdays inflation spike which is inline with the inflation mega-trend analysis and forecast whilst the academics still argue the case for non existant deflation.

Academic economists producing models in ivory towers detached from the real world failed to realise or comprehend the consequences of both government employment measures such as the 1/2 million of public sector jobs created during the recession, student and quango run training programme's and the change in employer and employee behaviour where employees agreed to pay freezes, pay cuts and 4 day weeks so as to enable the maximum number of workers to be retained in employment that explains the 1 million disparity between academic economic models and the real world.

Despite clear evidence of the above during early 2009, academic economist still stuck to theoretical models that failed abysmally as the following selection illustrates, and also explains why the Bank of England remains clueless as to the real direction of the economy especially evident in Tuesdays inflation spike (20 Apr 2010 - UK Inflation Soars CPI 3.4%, RPI 4.4%, Bank of England Forecast Wrong as Usual ) http://www.marketoracle.co.uk/Article18789.html

European Commission - May 2009 - It expects UK unemployment to rise to 9.4pc by 2010 leaving 3m workers jobless. http://www.telegraph.co.uk/finance/fina ... casts.html

British Chambers of Commerce - April 2009 - Last month, data confirmed that the total number of people out of work surpassed the 2m mark in the three months to January, taking the official unemployment rate to 6.5pc – the highest since 1997. The BCC believes the total could hit 3.2m by the third quarter of next year. http://www.telegraph.co.uk/finance/fina ... warns.html

Bank of England - Blanchflower - April 2009 - Warned unemployment was likely to top 3 million by the end of the year and there was a 'good chance it could go much higher still'. http://www.forbes.com/feeds/afx/2009/04 ... 02846.html

CBI - Feb 2009 - The UK’s leading business group predicts the recession, which began in the third quarter of 2008, will last throughout 2009. The economy is expected to contract by 3.3 per cent and unemployment will reach close to 2.9 million by the end of the year. http://www.mortgageintroducer.com/mortg ... ession.htm

UK Unemployment and the Election Economic Recovery

Labour will shortly be playing its Election Ace which will be an economic growth surprise to the upside on release of UK GDP Data for the 1st quarter of 2010 on 23rd April as per the forecast (31 Dec 2009 - UK Economy GDP Growth Forecast 2010 and 2011, The Stealth Election Boom ) http://www.marketoracle.co.uk/Article16167.html and in depth analysis in the Inflation Mega-Trend Ebook (FREE Download). Which is set against the mainstream press / academic economists continuing debate of a potential double dip recession.



A strong economic recovery would imply that the UK unemployment picture should improve over the coming months with a potential drop of as much as 200,000. However this trend faces two problems :

1. Spare Capacity - As mentioned earlier, many workers are being kept under-employed i.e. working 4 day weeks, this means as the economy recovers the slack will be taken up by existing workers.

2. Public Sector Job Cuts - In the region of 1/2 million public sector jobs will go over the next 18 months in an attempt to bring the huge budget deficit under control.

Which suggests that UK unemployment will start to rise again to a new high. How high depends on the nature of the next government as neither Labour nor Conservatives have made their true intentions on the budget deficit reduction clear.

Source: http://www.marketoracle.co.uk/Article18838.html

By Nadeem Walayat

http://www.marketoracle.co.uk/Article18838.html