Unemployment may have peaked, figures suggest

Author: By Sean O’Grady, Economics Editor

That would bolster expectations, raised by more optimistic surveys of business confidence, that the economy as a whole has turned a corner, and will return to growth by the end of the year. Even if unemployment does start to rise again, the pace of the increase seems likely to be much more moderate than in the earlier phase of this downturn.

The officially favoured measure of unemployment, comparing consecutive quarters, still shows an increase of about 30,000 on the headline number, but even this is much lower than in previous months. At 7.8 per cent of the workforce, the unemployment rate is unchanged. The claimant count ? those qualified to receive jobseekers allowance ? in October was 1.64 million, only a very small increase of 12,900 on the previous month.

However, any optimism about the labour market or the economy more generally was tempered yesterday by the Governor of the Bank of England, Mervyn King, who issued a stern waning that the country had “only just started” the “long hard path” back to normal economic conditions.

Indeed, were it not for a rising trend of people taking-part time and temporary jobs while seeking permanent positions ? now totalling 1.4 million ? the unemployment numbers would probably be close to the three million figure forecast by many economists. Youth unemployment stands at almost one million, and some 1.1 million people have been without a job for more than six months.

Answering that challenge, a radical shift towards more polytechnic-style courses being offered by universities was unveiled by the Government yesterday, as ministers pointed to a fall in the number of 16- to 17-year-olds who are unemployed, from 206,000 in the last quarter to 197,000.

Business Secretary Peter Mandelson announced plans to establish 1,000 new scholarships ? worth up to £1,000 a year ? to encourage apprentices to take university degree courses. Under the scheme, youngsters with advanced apprenticeships would be give a point score by Ucas, the university admissions service, in the same way as A-level passes are awarded points.

These could then be submitted to university admissions staff to pave the way for enrolment on a degree course.

“We need engineers to lay the cables to expand access to high-speed internet, skilled people to build the electric vehicles of the future, and technicians to develop the medicines that will save lives,” said Lord Mandelson.

The scheme was one of a number of measures outlined in a new skills strategy document published yesterday which also included plans to create 35,000 new apprenticeship places during the next two years – and also give every adult a personal skills account which could be used to buy entry on to course to improve their qualifications.

To avoid the corruption engendered by the former Individual Learning Accounts scheme for adults, the money would go straight to the institution providing the course rather than to the individual to purchase a place.

Lord Mandelson’s move follows a call by former Education Secretary Baroness (Shirley) Williams for a return to the polytechnics. He denied this would happen as a result of his scheme although university chiefs said it would mean universities offering more specialised courses.

If such measures mean that unemployment does soon peak, it will be at significantly lower levels than in previous recessions, and the zenith will also have arrived more quickly than in those downturns. In the 1980s it took almost five years for the jobless total to reach its peak; in the early 1990s it took about three years. The disparity between a generally sluggish economy and improving unemployment figures is probably explained by the fact that many people are now willing to accept the kind of work that would previously have been considered unacceptable.

The “barrister to barista” phenomenon of formerly professional and skilled workers taking less skilled jobs ? perhaps encouraged by the efforts of Job Centres and various welfare-to-work schemes ? seems to have kept unemployment down, by as much as 400,000. Moderate pay demands, also in contrast to previous downturns, have also helped.

Even so, many economists expect further waves of redundancies next year as tax hikes, public spending cuts and, eventually, rising interest rates take their toll on spending an investment.

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