From the TUC

We aren’t going to export our way out of this mess

10 Sep 2010, by in Economics

As Nicola shows in a new analysis, it will take a very long time for private sector jobs growth to make up for the jobs lost in the recession and the public sector jobs the coalition plans to scrap. As Connaught has shown, government cuts will hit private sector employment as well as public, and as I noted yesterday, the Bank of England’s agents report that business confidence has “ebbed”.

In addition, the National Institute for Economic and Social Research expects growth to slow in the second half of the year and this gloomy forecast was seconded yesterday by the Organisation for Economic Co-operation and Development, which forecast that quarter on quarter growth in the UK would slow from 4.9% in Q2 2010 to 2.7% in Q3 and 1.5% in Q4.

What is going to make up for this? The coalition have relied on the Office for Budget Responsibility’s employment forecasts. We have been sceptical from the outset: their expectation that 2 million jobs or more will be created over five years would require much better performance than in previous recoveries, and the jobs growth in those recoveries was concentrated in finance (perhaps not so likely this time) and the public sector.

We have also worried that the OBR’s forecasts for GDP show exports playing a positive role, with the net contribution to GDP from trade rising from -£30bn in 2009 to +£10bn in 2015. This is based on a forecast that GDP growth in UK export markets will steadily rise from 4.7% in 2011 to 6.6% in 2013, easing off slightly in 2014 and 2015.

In other words, demand everywhere else will partly make up for cuts in the public sector at home. That of course was the strategy of Ireland in the 1980s and Canada in the 1990s. But both countries were able to take advantage of the fact that demand was growing in their export markets – we are in a position where practically the whole of Europe is trying to recover by exporting to each other. We worried that the UK’s experience in previous recoveries was that our propensity for consuming imports recovered first of all, and yesterday’s trade figures confirmed how right we were: the total seasonally adjusted deficit in trade in goods and services in July was £4.9 billion, up from £3.9 billion in June. As the Financial Times noted (paywall) this deficit is a post-war record.

The outlook for the future contribution to be made by trade is no better than the current picture, with the OECD’s interim economic outlook declaring, “the pace of recovery could be slower than anticipated.” Purchasing managers’ indices in the US, Japan and the Euro Zone have all, after a substantial recovery, turned down again and the OECD believes that “business confidence has weakened” across the developed world.

There is still time for things to change, and business confidence can be volatile, but right now the coalition’s claims that private sector growth will make up for lost public sector jobs and return us to pre-recession levels of employment look extremely weak.

One Response to We aren’t going to export our way out of this mess

  1. Peter de Havilland
    Sep 11th 2010, 6:05 am

    I agree it will be slower. The Dot.Com Bubble synthetically hyped us ( no 2 player after the U.S. – least we forget U.K.
    companies forged innovation in computer technology and through an aggressive licensing policy supplied an eager market with actionable intellectual copywrite too ).

    It is a popular myth circulating now that the Dot Coms
    played the role of cavalry arriving at the the eleventh hour. Yet it did help boost us out of a torpid period of
    ridiculous growth targets, the failure of these to be met, while the back room bean counting boys ‘magicked’ novel ways of persuading the bottom line GDP to at least come to the party.
    But how many jobs did the Dot.coms contribute per capita dived by start up funds invested. An over simplification but at 4.30 a.m. sums of numerical simplicity do not defy ill health and sleep deprivation.
    Indeed unless this ”government’ ( with a small g for genius ) hypes a new synthetic recovery instrument what are we going to do?
    Sell our financial services to Greece?
    The former idea isn;t so potty. Renewables is ripe for a pan -european governmental pump and dump.
    All the coalition really wish power in the same way as the Sex Pistols sang, ‘ We don;t no what we want, but we know how to get it …etc etc’.
    With the economic markets here and the U.S trading like a hurd of bucking broncos the money has to chase the money somewhere. The markets are not rational. Therefore a unilateral policy to hype renewables could work.
    Sadly the two most promising technologies are not suited to the U.K. Although one of them what I would call a ‘short to mid term bridging technology’ may just work if the political will exists to A) invest wisely in a start up model B) Place on a fast track schedule – seek to audit the figures from operational models in Poland and Georgia C) Work with the unions to insure those employed are local to site – because this technology is UCG -the added benefit being the geologically appropriate mines are situated in the very poorest regions of the UK. Smaller UCG plants providing clean energy to the local region, clean high grade aviation and retail fuel while creating hydrogen as a by-product which indecently may well become a viable secondary market ( fuel cells etc ) as soon as there is a premium for it; mediating one via a little government intervention is not too difficult and once again a clean solution.
    I spent this year, when well enough, calculating every damn part of production, from BTU to heat loss per Km per Kilowat. Looks good. Next step is to have my figures audited or better still an expert recalculate from ground up.
    The gains, social, employment, ecological are promising.

    The other technology is a true renewable but one not suited to this climate and terrain.
    We could invest in it and position ourselves as the word’s main supplier.
    You don;t know me. I could be a total nutcase. Depends who you speak to I guess.
    Wishing the greatest benefit for the greatest number of people does by the standards of the ConDems diagnoses the most reasonable of men certifiably barking mad.
    Earlier during this marathon reading ( learning ) session
    I came across that Vince Cable quote in regard to science where he not only raised the question, how much cash in the short term will through pure /’ curiosity’ based research yield? As your science contributor adroitly surmised misses the point, while indicating a diagnosis of terminal short-term opportunism with possible complications; myopic desperation, the transparent variant.
    Anyway as it is the weekend it’s time to risk releasing the inner idiot by actually submitting this prolix ramblings of a disabled yet still vituperative man.
    As a previous expert advisor to the Labour government
    ( addiction and mental health 97-99) and only recovering now I have spent this year collating the ingredients used to formulate my future outcomes over three time periods. The probabilities do involve a discretionary component. This isn’t Delphi ad I make no big claims for my predictions.I use them as a part of a tool kit.
    However after decades of perfecting this dark art I stand there in front of the wash basin last thing at night
    and visions of an apocalyptic dystopia as realised by Joel Schumacker ( starring the governor of LA: okay california ) spring into mind I take a long hard look in the mirror, pinch myself but no this is not a dream.
    The ConDem’s cohort rallied the vanguard of fearful homeowners. They harnessed the unbridled frustrations of many and to mix a metaphor the arrow has found it’s target; those evil undeserving poor. I make light of the situation but say exactly what those in opposition to what may develop into greatest travesty since eugenics.
    Every totalitarian regime in history forms a private militia at the first opportunity. This war is a socioeconomic war. This time the bootboys won;t be wearing brown shorts.
    The sheer volumes of scary opinions turning up across the net can be discounted partially by the explosion PCs. I hear remarks, see behaviour in public that one would never encounter a few year back.
    And the false beliefs. How many times do I read blog comments as i found here, presuming everyone renting is on HB?
    i live in Earls Court. If there is an agenda it is to get rid of anyone on HB since there is a huge shortage of rental properties in Central London. Large corporations, mainly banks, international commercial law firms for example happily pay over ihe odds and thus push rents ever skyward.
    My turn to play the little englander. I fought for this country, paid a ton of tax, tried to make a contribution to society in general and wish so in the future. Yet i am disabled. I;ve tried going back to work and ended up in hospital and great expense to the tax payer.
    An aspect of Earls Court is that the area is home for representative from every conceivable economic subgroup.
    Those living on the dole are hardly rolling in it. `Very very hard to live on DLA too.
    I never thought a government would stoop to the oldest and insulting form of cheap proganda; finding a few examples of HB recipients living high off the hog.
    For the reseans expounded earlier this very successful campaign to demonise the weak and inpoveridshed worked a dream.
    Overt cynicism of the basest kind only works on a poorly educated society in general. And of course the reasons already outlined.
    Time for those who believe in a fair society to march even if one has to disregard the terrifying off prescription uses the Anti-terror laws are pressed into service.
    I am not a blog comment type of dude. `Prefer lay out my arguments armed with rhetorical devices fashioned through diligent use of research.
    Ah the life of the vane.
    Wishing you a great weekend.No more coffee
    yours sincerely
    P de H