Let’s remind ourselves of why it doesn’t pay to pay attention to ‘official’ economic forecasts.
A year ago, a few people were still debating whether there would actually even be a recession in the UK. Even if there was, the general feeling was that it would be a short-lived little affair.
But now, apparently, this recession is already worse than the one in the 1990s, according to the British Chambers of Commerce. The manufacturing and services sectors had a dreadful fourth quarter, while retailers have just seen their worst December on record (although bear in mind that the records in question only stretch back 14 years). According to the British Retail Consortium, like-for-like sales fell 3.7% year-on-year.
How much worse can it get? Oh, there’s a fair bit of room to fall yet…
More job losses are on the way
The front page of the Telegraph business section this morning surveys the carnage of the British economic slump. Manufacturers and retailers are seeing activity collapse. The situation in the property market became even worse in December – something few people thought possible – with average sales per estate agent hitting a fresh all-time low of less than one home a week, according to the Royal Institution of Chartered Surveyors (Rics).
Bear in mind that an estimated 32,000 estate agents have lost their jobs since the start of this crisis. I’m not entirely sure how this impacts on the Rics figures, but presumably it casts the sales per agent figure in an even worse light – a huge amount of competition has been taken out of the market, and yet even the agents who are still standing are seeing sales fall.
Unsurprisingly, all this economic misery is not good for jobs. Rising house prices have supported spending and construction activity for years. Now that they are falling, spending is too, and no one can afford to build anything any more.
A total of “almost 4,000 jobs were cut or placed in immediate jeopardy yesterday,” says The Telegraph. Jobs went at Waterford Wedgwood, Waterstone’s and logistics group Wincanton, among others, while furniture retailer Land of Leather fell into administration. Digger maker JCB cut 684 jobs, saying that “the lack of available credit from banks had meant that its customers had been unable to afford new diggers.”
This last comment is interesting. It continues to push this idea that if only the banks would lend money, people would be buying stuff. But why would anyone want to buy a digger right now, credit or no? What exactly would they build? ‘Luxury’ city centre flats? Got a few too many of those already. Office space? Maybe not. Shopping centres? You get the picture.
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Why the latest efforts to prop up the job market won’t work
Meanwhile, the Government’s latest efforts to prop up the job market are just plain stupid. Gordon Brown unveiled a new initiative to get the “long-term unemployed” back to work. From April, companies will be paid £2,500 to recruit and train people who have been out of work for more than six months.
This would be hilarious if it wasn’t so depressing. If the long-term unemployed couldn’t manage to get themselves back to work during a boom period when unskilled Poles and hard grafters of all other nationalities flocked to our shores to snap up jobs, why on earth does he expect them to do so now?
We’re entering a period where decent new jobs will be like gold dust. Companies are not going to be hiring willy-nilly. When they do, they will be swamped with applicants. So the prospect of getting £2,500 to train a low-calibre candidate should not be very tempting, when they can easily pick up highly-skilled, eager-to-work casualties of the downturn instead.
Of course, it fulfils Mr Brown’s mission to be seen “doing something.” Yesterday he argued that “failure to act now would mean a deeper and longer recession” which would mean “lasting damage to our economy and a bigger bill to pay in the future. That will not happen on my watch.” They’re his usual macho soundbites. But they conveniently ignore the fact that the sum total of Mr Brown’s actions over the past decade have been to lead us into this financial crisis – quite possibly the worst in living memory. If only he had simply spent the past decade “doing nothing”, we might all be a lot better off now.
Cutting taxes is what would really help the economy
If it really has to, the Government could still do something – it could cut taxes. That would put more money in people’s pockets, which they could use as they wished. It could cut spending on unproductive non-jobs to pay for it – there are arguably plenty of people in quangos and in public sector middle-management posts who would cost the taxpayer far less and do far less damage on the dole than in their posts.
But this won’t happen. Rather we’ll get a load of high-profile, high-spending, wasteful initiatives that will drive us deeper into the hole we’re in. Don’t bet on a rapid recovery for the British economy – Mr Brown will see to that.
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