Guest Post - Unemployment figures and clients of the state

Today’s headline unemployment figures show that on the face of things at least, the country is getting back on track, however when you look at the details a different picture emerges.

The headline figures show that the employment rate has risen by 0.3% so there are now 28.86 million people in employment, whilst unemployment fell by 0.1% to 2.5 million people, 1.59 million of which are claiming jobseekers allowance.

What is more interesting though is the detail, the bit that is never reported and specifically the bit that tells us about this government’s approach to resolving unemployment and creating jobs. That is the split between employment in the public and private sector.

If you delve into the figures you can see that the number of people employed in the public sector in the last year was up by 7,000 workers to 6.1 million, whilst the number of people employed in the private sector fell by 61,000 to 22.76 million. This means that a little more than one fifth (21%) of all employed people in this country are employees of the state, bringing in no tax revenues for the government and supported in their entirety by the tax revenues of private sector jobs.

And oh how they are supported. The ONS figures show that the average private sector employee earns £22,152 per year whilst the average public sector employee earns £23,972 a difference of £1,820 a year, a figure that excludes their gold plated pension scheme and other benefits.

What about pay rises then? Well, whilst the private sector has spent the recession battening down the hatches and freezing pay over the last year the same cannot be said about the public sector where average pay is actually up by an inflation beating 3.8%

Stop and think for a minute. Those workers represent a public sector salary bill alone of £146.3 billion pounds, if only 10% of those jobs were in the private sector instead that would be at least an extra £4.7 billion pounds of income tax and National Insurance every year and would save the exchequer at least £14.6 billion a year in salary costs. That’s £19.3 billion gone from our record 101.3 billion pound deficit in a stroke, but instead of trying to create private sector jobs over the past decade, Labour and Gordon Brown, have instead focused on creating jobs in the public sector.

Since 1997 the number of public sector jobs has actually risen by 11% a record figure. Why? Because Labour, and specifically Gordon Brown, wants to make everyone a client of the state. Whilst at University, Gordon Brown wrote an article that pointed out that if the Labour party could make a majority of the population clients of the state, that is either dependent on the state for employment, or dependent on it for benefits, then they could remain perpetually in power.

For the last 12 years, both whilst he was Chancellor of the Exchequer, and now as Prime Minister, he has been doing everything in his power to deliver on that vision for Britain, but it won’t work. Why? because the Conservative Party don’t want to see our great country reduced to that, so we will fight against it, becuase private business refuses to see the world that way, acting to subvert it, creating jobs and growing not because of, but despite, red tape and bureaucracy, and most importantly voters can see it for the scam it is and will vote against it come election day.

Nadhim Zahawi is the Conservative Prospective Parliamentary candidate for Stratford-on-Avon for more details see his website at www.zahawi.com

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Double dip recession, or did it never end?

Today’s news that UK Retail sales have fallen by 1.8% between December and January, the largest drop in over 18 months, is yet more bad economic news for the government. Coming on the back of the latest underlying unemployment figures, the glacially slow GDP growth figures and record government borrowing in January, I think that the chances of a double dip recession have just increased significantly.

The ONS are putting a brave face on the 1.8% decline, pointing to heavy snow fall in january that reduced the sale of household goods and petrol. I however suspect that steady drive of the January sales into December meant that the Q4 GDP boots of just 0.1% in the last quarter of 2009 had just as much to do with the january sales starting earlier than it did with economic growth.

I have been saying for a long time that the headline unemployment figures are hiding a nasty reality underneath and finally this time the mainstream media caught on, perhaps thanks to some quality briefing from CCHQ.

Total unemployment fell by 3000 to 2.46 million, a reduction of just 0.12%, which if this was a poll or survey would be well within the margins of error, whilst those claiming jobseekers allowance rose by 23,500 to 1.64 million, a rise of 1.45%. What this suggests is that there was a large group of individuals either doing seasonal work and who have now lost their job or who were holding out to find another job who have now been unable to find anything, neither of which are a good sign.

The rising number of people considered “underemployed”, i.e. who want to work more hours, is also a bad sign, someone who is working less hours than they want to no doubt has less money to spend. The number of people filling temporary jobs also increased perhaps showing that employers are unwilling to take on new contract staff and expect more bad times ahead.

Again the number of people who are economically inactive increased whilst a new record number of 16 and 17 year olds were unemployed which suggests that employers are continuing to allow people to retire without replacing them with new younger workers.

Perhaps the most worrying economic indicator towards a double dip though is the record government borrowing in January. I say record, but for the first time since records began the UK government have had to borrow money in January which is a terrible sign. Traditionally January is a very good income month for the government with VAT from increased Christmas sales, and income tax from the self employed. In total tax receipts were down 11.8% compared to last year meaning that the self employed and businesses have been hit hard. Either they haven’t made as much money in the past year as they did the previous year or in a potentially even worse situation they can’t afford to pay the tax they already owe. Neither situation is good news

Brown continues to tell us that we are best placed to come out of recession and that the recovery is fragile and any spending cuts will destroy it. In reality all the evidence seems to point either for us to double dip or that therecovery just hasn’t happened. The ONS have yet to revise the GDP growth statistics with full data and with indicators like this it won’t matter how much Brown prays for them to be revised upwards, I just can’t see how they will be.

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Labour: we’ve literally created 1.27m jobs

New research from Manchester University’s Centre for Research on Socio-Cultural Change shows that of the 2.24m net new jobs created by the Labour government between 1997 and 2007, an enormous 1.27 million of them (57%) were actually state or para-state (i.e. dependent on state funding or contracts).

The situation is even worse in certain areas such as the North-East where 79% of all new jobs were state dependent as opposed to 41% in London and teh South East. In some areas such as the West Midlands there was actually a net drop of 37,000 jobs in the private sector and an increase in 105,000 in the state and para-state.

These figures totally destroy Labour’s claims to have built the economy up and created new jobs. It suggests that a large reason for the economy’s growth during the 10 years of boom was really the creation of state jobs and an increase in state spending. It also suggests that the government has been propping up its vote in various areas by creating government and government funded jobs in areas where employment would otherwise have risen.

The more worrying thing i that it also suggests that there’s almost no way they can cut government spending without a resulting increase in unemployment. Difficult times will be ahead for all.

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Unemployment vs economic activity rate

So the unemployment figures are out and unemployment is down by 7,000 people reducing the unemployment rate from 7.9% to 7.8%. This is obviously a good thing, although doesn't help my case in my last post.

However there is another figure that isn't looked at often which is the economic activity rate. That is the percentage of people within the labour force who are either in work, or looking for work. This would include for example people who have taken early retirement, and also I believe people who are on incapacity benefit and other benefits (but obviously not job seekers allowance.) The economic inactivity rate (the percentage of people who are neither in work nor looking for work) figure has actually increased to 21.2% in the last quarter, its highest since August 2007.

Unemployment is clearly an important measure to the success of the economy, and the confidence of business, but less economically active people is obviously an issue for the Treasury because it means less tax revenues and potentially a higher deficit.

Update:
There's more bad news in today's figures as well with the number of long term unemployed (unemployed for a year or longer) increasing by 29,000 to reach 631,000 people, the highest since November 2007 and representing 25% of all unemployed people. I'm guessing though that this and the economic activity rate won't get past the spin of falling unemployment figures. I'm sure Brown won't be mentioning it at PMQs today. I hope someone at CCHQ is paying attention.

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Inflation, interest rates, credit ratings and unemployment, June election?

Inflation
Yesterday’s news that CPI (Consumer Price Inflation) has risen by the largest one month amount in history, from 1.9% to 2.9% is far from good news for the economy and for Labour’s chances of getting re-elected.

Interest Rates
Mervyn King then bumbled along and pointed out that it may well rise above 3% (it’s only 0.1% away and went up by ten times that in one month so I think it’s a fair bet) and that interest rates will have to rise to control it. He also helpfully pointed out that this will all the patience of Britons who will be “sorely tried” as a result of stagnant pay levels and a real terms decline in living standards.

Credit Rating
At the same time the credit ratings agency, Fitch, has said that the government's plans to reduce the deficit by half within four years aren’t gutsy enough and that if it doesn’t see further spending cuts then it will be doing some cutting of its own by reducing the UK’s much vaunted triple A credit rating.

Unemployment
To top this off today will see the announcement of the latest unemployment figures which are expected to see around 2.5 million people unemployed. However this raw figure hides the real picture of how difficult the job market is with 18.4% of people aged 18-24 being unemployed as opposed to 6.3% for 24-49 or 4.5% for the over 50’s. So unemployment figures are actually hiding something quite interesting, that through this recession people may not have been losing their jobs in the same numbers as in previous years but companies simply haven’t been hiring young school, college and university leavers. Jobs are probably being dropped by that fantastic phrase “natural wastage”.

Election?
So with inflation sky rocketing, interest rates about to go with them, the country’s credit rating in real trouble and unemployment at a new high, how likely do you now think a March election is?
With Gordon Brown’s election strategy seemingly being that he wants to be able to say “look we got us out of this recession that we got us into” he needs good positive economic news before he can call one. If the figures don’t pick up soon then I think he may well see a drubbing at the local elections as not as bad as the economic state of the country and stick it right out until June. Anyone want to place bets?

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45% of the PM's constituents...

Guido, in his constant Jonah watch has pointed out that the curse of Gordon Brown has now hit his own constituency where unemployment is at record levels for the area.

The most interesting point though is that 45% of Gordon Brown's constituents are either claiming jobseeker's allowance or work for the public sector and are hence paid out of public funds. Has he been building up the nation's debt just to pay his constituency

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