Last week’s unemployment figures for the UK were heralded as the lowest for thirty years at 5.1% (down 0.1%) with even the numbers claiming jobseekers’ allowance declining.
Our “working” population has risen by 465,000 in the past year to a total of 29.51 million and apparently this is the biggest increase for a decade. Just to add to the unremitting joy, vacancies were also at their highest since the current records began in 2001 and even redundancies were at their lowest, 106,000, since 1990. Surely a wondrous day for the British economy?
Mind you, given the current gloom elsewhere in the financial world, some good news is a rare and very welcome commodity.
But being a tiresome Jeremiah at the moment, I feel bound to question what we are actually being told and fed. After all we are often reminded that the French have a higher rate of unemployment at 8.7% and with their maximum 35 normal working hours per week, obviously are a lot less productive than us. Now admittedly 35 hours only takes you up to Wednesday in the Hong Kong working week, but nonetheless the French seem to still come out as being more productive than the British. This however is not really my gripe. The key point is that the French unemployment statistics include other groups such as those “signed off” for illness and other short term training schemes. You may recall that the latest numbers we have had for the UK for those feeling “a little dickey” seems to hover around 2.7 million. With a rough calculation then, the addition of these numbers to the current unemployment figures would give us an equivalent unemployment figure of approximately 13.4%! Something does not add up here.
However, even this strange arithmetic distortion is not my main concern, but rather that this welcomed news of falling unemployment seems to fly in the face of the other headline news indicating diametrically the opposite trend.
A cursory stroll around the newspapers soon brings out some contrarian signs. From the not unexpected job losses at Northern Rock, to some 750 being laid off in credit card operations in Nottingham, and then JP Morgan speculating that some 40,000 jobs could go in the “City”, it does not give one the great level of confidence. So what is going on? The answer lies in a question of timing. As we are all aware by now, the growth in the UK economy is slowing and as yet we don’t know by how much or for how long this might continue. The effect of this is likely to be reflected in the employment figures but only as the slow down spreads throughout different areas of the economy.
Because of the “credit crunch” it has been the financial services sector that has been affected first. This has been on a broader basis than we have seen in previous such slowdowns. Unlike the 2000 TMT equity “crash” where those most affected were involved in the flotation and trading of overhyped stocks, this time the damage is broader. The reverberations will be felt further afield to include investment bankers and fund management houses, mortgage providers and advisors right through to credit card companies. The effect on the construction sector will also be quite dramatic as future commercial property developments are put on hold and housing projects delayed until the mortgage dam is broken. Part and full time contractors will feel the squeeze quite swiftly. Now comes the next stage, where we are already seeing the retail sector being affected as illustrated by the axing of 72 stores by JJB Sports with 1200 redundancies (although 400 will be transferred to other stores). Undoubtedly there will be more especially in the high street and shopping malls, not just because of the squeeze, but increasingly because of our predilection for buying online.
Thus what this is indicating to me is that we are at the last course of the feast just before the famine. I suspect by this time next year the crowing calls of confident politicians over their employment figures will be increasingly deafened by the anguish cries of those worried about their jobs and income.
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And finally………….it seems that the Japanese level of good taste and design is still in good shape, as it would appear that a Tokyo museum is having difficulty in getting the authorities to agree to allow them to display Damian Hirst’s signature work “cow in formaldehyde”. Apparently it may fall foul of the Japanese ban on British beef imports. Perhaps they might like to keep it?
Have a good weekend,
Justin A. Urquhart Stewart
Director
Seven Investment Management Limited