Unemployment to Spike Near 3 Million

The CIPD has made a stark warning that unemployment will reach three million within two years as a result of government efforts to cut public sector spending.

It's a landmark figure that on the face of it, hasn't been reached since the mid-1980s, although the definition of unemployment has changed a good deal since then. All things being equal, it's a level of people out of work on a scale we've not seen for some time that will be more difficult to claw back from this time round.

The organisation previously predicted an unemployment peak of 2.65 million by the end of 2010, before the change in government policy. Now it reckons unemployment will peak at 2.95 million by 2012 and not significantly fall until 2015. That's an extra 250,000, or about the population of Nottingham, out of work.

According to CIPD chief economic adviser Dr John Philipott, his predicted unemployment figures are a delayed response to the recession that is coming through now that the government stimuli have been curbed.

It's likely that public sector workers are hit hardest by job cuts, as the government seems bent on cutting four pounds of spending for every one pound gained in extra taxation. Philpott says public sector job cuts have been offset in past rationalisations of public spending, by increases in private sector employment. This time, it's unlikely the private sector will be able to take up the slack.

In some areas of the country, the workforce is disproportionally weighted towards the public sector, with little private sector employment to fall back on, even at the best of times.

Philpott notes these areas, such as Hastings, Ipswich, Newcastle and Barnsley have a history of underdevelopment, which is why they were earmarked for public sector investment when the money was there. It's these areas that will be hit hardest by the coming rise in unemployment.

It's not only individuals that will suffer. Businesses that depend on consumer confidence will likely see revenues hit as shoppers limit their spending. In the areas dominated by public sector employment, the local economies will practically shut down, making the prospects for local businesses very bleak indeed.
While the consumer economy is likely to be hit by the extra rise in unemployment, companies might expect to invest in overseas business to offset the fall in domestic revenues. But, Europe is the UK's biggest export region and countries there are having their own economic difficulties, dampening the markets and taking the shine off sterling-based prices.

Philpott recommends the best ways the government can buffer the fall-out from its expected austerity budget is by investing what little funds are available into making those who find themselves out of work more employable and by encouraging employers to invest in jobs by making changes to regulatory patterns.

He said: "It's important that those areas of the country that are going to feel real pain from public spending cuts are treated differently by the government from those areas with better private sector employment prospects. It will be a difficult challenge."

(Pic: Stooky Bill cc2.0)