Government Needs to Take Responsibility for Rising Unemployment

We can't control the eurozone, but we can take responsibility for the management of our own economy. The government has capacity to change course -it is a national tragedy that it is choosing not to.

Yesterday's unemployment figures were shocking. There are now 1,016,000 young people aged 16-24 who are looking for work, 26% of whom have been out of a job for over a year.

Stark regional differences are re-emerging: in the north east the adult unemployment rate is now 11.6%, and has risen five times faster than the national average on the year.

The number of employees fell 305,000 on the quarter, the overall unemployment level is the highest it's been since summer 1994 and with vacancies stagnant there are now 5.7 unemployed people for every available job. The labour market is back in recession.

Yet in a staggeringly complacent response Chris Grayling, Minister for Employment, toured the TV studios telling us:

"These figures show just how much our economy is being affected by the crisis in the eurozone. Our European partners must take urgent action to stabilise the position."

This is an interesting claim - and one that, upon examination of the evidence, doesn't stack up.

Unemployment is widely acknowledged by economists to be a lagging indicator and as our economy has been flatlining all year, recording just 0.5% growth in the last 12 months, it is this significant shortfall in output that the jobs figures are responding to.

The impacts of the fall in eurozone growth are yet to show up in our labour market (although when they do the picture looks set to get even worse).

It's also interesting that several eurozone countries are doing better than the UK.

Employment in Germany is still rising, youth unemployment across the Eurozone is lower than our national average and over the year UK growth has been poorer than most other European countries. If the eurozone was responsible for all of our woes it seems sensible to expect that countries in the middle of the middle of the crisis would be doing worse, not better, than the UK.

So, as Lord Oakeshott said yesterday: "It's ridiculous to blame this rise in unemployment on the crisis in the eurozone."

So what is causing the jobs crisis?

Firstly, the government has actively cut spending on welfare to work measures. One of the first cuts introduced was a £320 million in year reduction to the Youth Guarantee, which provided every unemployed young person claiming JSA with a guaranteed job - under the Future Jobs Fund - or training place.

Most young people are now limited to unpaid work experience (a programme which has the same job outcome rates as for non-participants, suggesting its net impact is negligible). Unsurprisingly this has had consequences - the number of people in employment and training programmes has fallen dramatically since last year.

But of course the key factor that will determine whether unemployment starts to fall is the state of our economy. With the government's forecasts on investment, consumption and exports all falling short of the mark the economic folly of a four-year cuts led deficit reduction programme is starker than ever.

Put simply, without growth, unemployment will continue to rise. And with every driver of growth disappointing, and the government remaining committed to significant cuts in public spending, it's hard to see where it's going to come from.

We can't control the eurozone, but we can take responsibility for the management of our own economy, which is crying out for a significant stimulus package and for greater support for those at the hard end of our under performing labour market. The government has capacity to change course -it is a national tragedy that it is choosing not to.


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