Thursday, 18 February 2010

Don't panic, it's not a double dip!

Yesterday's statistics from the Office of National Statistics which illustrate a 23,500 rise in jobseekers claimants in January will inevitably spark fears of a double dip recession.

This would be a misreading of what is going on. Our labour market is now much closer to the American rather than the European model, in other words highly flexible, which is bad in the bad times as company's can lay people off quickly. However, the reverse is also true, in that when things start picking up company's can quickly pick up the phone and get people in rapidly.

How flexible are we compared to others? Well, if you want to get rid of employees in Germany it takes on average nine months while you consult with the Works Councils. In France, it's even worse. This was one of the major contributors (along with the astonishingly laid back attitude of the European Central Bank towards interest rate intervention) to sluggish European economic growth in the Noughties when the UK economy was roaring ahead.

So why the increase when we are supposed to be coming out of this downturn? Two factors immediately spring to mind. Firstly, many seasonal workers will have been taken on for Christmas and then let go again in the New Year. Secondly, I suspect the weather has had a one-off impact which has to be factored in.

Where do we go from here? Regular readers of my postings (he knows who he is!) will know that I have been cautiously optimistic about our economy even at the start of 2009 when it looked as if the entire country was about to go belly up. My belief is that from March/April unemployment will start a downward trajectory with economic growth picking up speed from the middle of the year with good strong growth from 2011 onwards.


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