Unemployment shock. It's not that bad

Brian Dennehy

The unemployment numbers in the UK (and US) in recent days weren't as bad as predicted by the doomsayers. Reflecting on the words of Will Hutton, Eric Hobsbawm, and my Mum, the gloom of the last year was probably over the top, high unemployment does not prevent a recovery, and unemployed individuals don't enjoy the luxury of focussing on predictions of financial Armageddon because they're too busy trying to cope.

Will Hutton (economic commentator for the Observer) told the BBC on Wednesday that one year ago, after the steepest economic decline since the 1930s, no one could have believed that the outcome for unemployment would be quite this good. But, as we said at the time, such a sudden downturn was THE common feature of each major recession since the First World War (whatever the precise speed of this particular episode). And if, incidentally, it was the fastest downturn, it only encouraged hyperbole.  Only a few weeks ago George Osborne (Shadow Chancellor) was dominating the airwaves in the wake of poor UK economic growth numbers (where, incidentally, he  seemed to be the only person that believed them) telling all and sundry that this was the worst recession since the 1930s.  Wrong. it might be the longest, but is otherwise no worse than the early 1980s.

A year ago we also noted that UK businesses, at least those not connected with banking and property, went into this downturn in good shape, and not over-indebted, and this factor has clearly limited the pressure on businesses for redundancies on a greater scale.

The regular hype over unemployment reminded me of the reflections of the great 20th century historian Eric Hobsbawm on the 1930s and mass unemployment. “Curiously enough” he said “the sense of catastrophe…caused by the Great Slump was perhaps greater among businessmen, economists and politicians than among the masses”. The unemployed had no time for navel gazing - reference my Mum further on. 

And high unemployment has not prevented a recovery in the past. For example, in the second half of the 1980s, as the Thatcher boom built a head of steam, unemployment in the UK remained over 10%. It was similar in the US in 1934-1936 when a (frequently overlooked) boom occurred despite the number out of work ranging from 16.9-21.7%.

Talking of unemployment in these terms might seem insensitive. Yet as a young boy in London in the 1960s my father was regularly unemployed, at a time when being out of work seemed rare and voluntary, and at first hand I observed the indignity of the queueing for dole at the inappropriately named “Labour Exchange”. I asked my mother for her abiding memory of those difficult times, and it was simply “we coped, because we had to”.  And in those words I sense the self-healing nature of all downturns.

So while the trauma of unemployment is real, so is the bounceability and dynamism of the wider economy, and of individual victims of the downturn and redundancy.

Whether the unemployment rate is 8% or 12%, in itself this does not prevent an economic recovery, and a hysterical focus on the number seeking work will be a poor guide to how the economy is actually performing. Of much greater concern is how the authorities (particularly in the UK and US) will turn off the stimulus tap without derailing the tentative stability now evident. The scope for policy error is huge (remember Lehmans) and it will not be helpful if they are distracted by the numbers out of work, however insensitive that might seem.
 

Print  Refer a friend