UK Unemployment Continues To Soar (Sour)

The UK claimant count and the unemployment rate continue to spurt higher. The count is the highest since the late 1990s (August 1998, for the percentage rate). Unemployment is skyrocketing. The number of unemployed persons rose m/m by 6.6% in January, by an outsized 10.9% in February, and by a slower but still bruising 5.3% in March. Employment levels (available only through January) show continuing accelerating declines.

The progressive growth rates (from 3Mo to 6Mo to 12Mo) show accelerating rates of unemployment rising at an annualized rate of 140% over the most recent 3-Mo period. Employment levels are dropping at an accelerating pace which has risen to an annual rate of -1.7%. The larger impact on unemployment growth comes about since employment levels are high as a percentage of the labor force while unemployment levels are low. When ‘small amounts’ are pared from the roles of the employed they can quickly become a huge proportion of the unemployed. Of course in historic context unemployment is hardly ‘small’ I simple refer to ‘size’ as a proportion of the labor market and relative to the ‘employment rate’ which at over 95% is quite large compared to unemployment at 4.5%. In that context the unemployment rate is ‘small’. It is this size mismatch that results in most of the extreme difference in growth rates for the employed Vs the jobless in addition to some less mechanical labor behavior. (like labor force participation) .

In response to these worsening trends Alistair Darling Chancellor of the exchequer has switched his budget forecast. He now sees that the UK economy will shrink by 3.5% - the worst contraction in modern times. The Darling also projects a deepening deflation with the RPI gauge falling to minus 3% by September. But the forecast still provides that the economy will begin to pick up by the end of the year, with a moderate positive growth rate of 1.25% restored in 2010.

Darling has also announced help for jobless young people and a car scrap-for cash scheme. A £2,000 stipend is to be paid to car owners who trade in autos over 10 years in age for new ones. It is not clear how much of this payment will be diverted to dealers who might offer poorer trade-in prices and how much will actually get to the pocketbook of those buying the new car and stimulate new purchases.