Thursday, 16 December 2010
Unemployment creeps upwards
The one thing that the UK must avoid is both high unemployment and increasing inflationary pressures. From a policy perspective, there are few viable options.
The UK may be heading in that direction. The inflation numbers, released yesterday, gave a stark indication that pressures were mounting. Today, the unemployment numbers ticked upwards, bringing the overall jobless rate to almost 8 percent.
The most striking thing about UK unemployment is that it seems to have been completely unmoved by the huge fiscal deficits and quantitative easing. The rate shot upwards during the autumn of 2008 and has remained high ever since.
Brown spent like a Prime Minister about to lose an election. The Bank of England, like the Greek God Atlas holding the world aloft, used their printing presses to prevent the UK banking system from collapse. Yet these herculean efforts had little practical impact on the labour market.
Defenders of the UK stimulus package and the monetary blowout will always argue that things would have been much worse without this emergency response. This is, of course, an unprovable counter-factual. What is clear is that the data provides little evidence that the mad policy blowout of 2008-9 had any practical benefit for the UK economy.