Spending cuts mean high unemployment is here to stay
Today, as has been widely reported, we have published new analysis that looks at private sector jobs growth over the past decade (from the pre-recession peak in each region) and the future likely outlook for the jobs recovery. The findings are grim. Even if the next decade sees private sector jobs grow at a faster rate than they did before the recession, it will take over a decade for the jobs lost during the recession, and the public sector job losses that are to come, to be replaced.
The impacts of cuts vary significantly among regions – in general, even during the boom years regions in the North saw far less private sector jobs growth than those in the South and have also been more dependent on the public sector for jobs creation. This means that unless there is a considerable change in the rate at which the private sector creates work, it could take these regions over 20 years just to get back to pre-recession employment levels.
The Coalition is keen to talk of ‘re-balancing‘ the economy. But we have yet to see much evidence of what this means in practice. A three year national insurance holiday for business start-ups taking on staff (it would be interesting to know how many start-ups generally take on new employees during their early years of trading – I would suspect the numbers are low) and a £1 billion growth fund split across the UK are not going to cut it: even during the last decade of sustained public investment and strong economic growth private sector jobs in many Northern regions only grew slowly, if at all.
The reality is that cuts of the scale and speed the Coalition are proposing will hit the private sector as much as the public sector, will reduce local demand as well as direct private sector investment, will mean unemployment is likely to rise in the immediate term (as the OBR have forecast) and that unemployment levels are likely to stay high for some time. After the 1980s and 1990s recessions public sector jobs growth was a strong driver of the recovery – this time around we still don’t know where the jobs are going to come from, but we do know there will be less of them.