Thread: Bank of England chief sees rocky ride ahead for economy

How does this effect you and I: It's all coming your way like a brick Wall

Bank of England chief sees rocky ride ahead for economy

By Edmund Conway, Economics Editor
Last Updated: 1:09am BST 18/07/2008

The Bank of England's new chief economist warned that the UK is facing its toughest economic prospects in over a decade, as unemployment increases at the fastest rate since 1992.

Spencer Dale, who succeeded the newly promoted Deputy Governor Charlie Bean this month, told the Treasury Select Committee that rising joblessness should help keep inflation and wage increases under control, but said the economy is facing a rocky ride.

It came after the Office for National Statistics said the claimant count of people out of work and claiming the jobseekers' allowance rose by 15,500 in June to 840,100. It is the biggest one-month increase in 16 years, and fuelled fears that Britain could face a 1990s-style increase in unemployment.


George Buckley at Deutsche Bank warned that the actual rise in overall unemployment may be even bigger than the 15,500, since many foreign workers may be returning home to booming labour markets in Eastern Europe rather than claiming benefits.

Although house prices have fallen and many economists think the UK is facing a recession, unemployment has so far remained low.

However, Capital Economics warned yesterday that unemployment could rise by 900,000 over the next 18 months, as the fall in available positions combines with a further increase in the size of the overall available workforce, due to higher immigration and more elderly people continuing to seek work.

Reassuringly for the Bank, the ONS also said that the rate of wage inflation remained low at 3.8pc - below its "danger level" of 4.5pc. However, the ONS's alternative wage measure currently shows wage inflation of over 4pc.

Mr Dale, 41, a former close adviser to Mervyn King, echoed a number of the Bank Governor's comments in his appointment testimony before the Treasury Committee.

He warned that the Bank remains vigilant about tackling inflation, which he expects to rise further from its current 3.8pc level over the coming months.

He also said: "We do see the housing market starting to slow. We see house prices falling since the autumn of last year. We see housing market activity also falling.

"If we think that the adjustment in the housing market is causing output to slow to an extent that will lead to a very pronounced downturn in the economy which will threaten the medium-term inflation target then I think it appropriate for the Monetary Policy Committee to respond to that."

Economists expressed relief that Mr Dale appeared measured in his approach to the fight against inflation.

http://www.telegraph.co.uk/money/main.j ... con117.xml

Are we the reason that all the other countries are having a hard time?
I haven't figured out how our government is at fault, if we are.
If so how?