Unemployment and the UK economic cycle

Wednesday, December 23, 2009
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The ONS has produced a short piece looking at what has happened to unemployment in the UK over the last three economic recessions.

Their data shows that the unemployment rate has (thus far) remained lower than it was in the first six quarters of the 1980s and 1990s recessions. The unemployment rate was 0.1 percentage points higher at the start of the 1980s recession than at the start of this recession. Several explanations have been put forward for this including a shift towards part-time working, greater use of short-time working to avoid compulsory redundancies, a fall in working hours and businesses encouraging some of their employees the chance to take unpaid breaks from work such as sabbaticals during the downturn. Wage freezes and (in some cases) pay cuts may have had some effect on total employment.

The forecast that official unemployment (using the LFS measure) may peak sometime in 2010 at around 2.8 million lower than the 3.0 million feared is welcome news but skeptics will always point to the inaccuracy of the jobless data - there is a significant level of hidden unemployment in the UK economy. See this article in the Times last week from Chris Dillow Double it and you get the real jobless total Another key issue going forward is the extent to which the UK will see a ‘jobless recovery’ when we start to emerge from the trough of the recession

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