Look under the surface of UK employment numbers, and something quite disturbing creeps out. Since 1978, the economy has generated almost 3 million new jobs. Superficially, that is an impressive achievement. Look a little closer, this figure hides enormous structural changes, which seem unsustainable over the medium term.
Starting with the job losses; since 1978 (-1 BT, Before Thatcher), 4 million manufacturing jobs have disappeared. Around another 800,000 also evaporated in largely blue collar activities like agriculture, energy. construction and fishing.
The job gains were centred in three areas; a) retailing, hotels and restaurants; b) financial services, and c) the public sector. Finance now employs one worker in five, while the public sector added over 2 million new jobs since 1978 winter of discontent.
These numbers emphasize a growing vulnerability. The UK is an economy largely based on shopping, money lending and public employment. In order to sustain these types of employment, the economy needs people to buy more things, borrow more money and pay more taxes. More borrowing and taxing hardly adds up to a formula for success.
Taken together, these three requirements seem contradictory. UK consumers need disposible income to buy stuff, but more borrowing and taxation, over time, reduces disposible income. Certainly, a spurt of borrowing will temporarily raise expenditure, but once those interest payments start to kick in, expenditure must fall.
Perhaps I am being too pessimistic. Maybe, there is still demand for more bankers, perhaps taxation can edge up a little further to pay for one more teacher and another nurse.
However, I feel it is more likely that the UK growth model has reached its limits. The economy is about to enter into another painful period of structural adjustment where finance sheds jobs, real wages fall, and some of those low skilled manufacturing jobs, which formed the backbone of the 1970s economy, begin to return.