Today’s topic is one that I hoped never to have to write. If we look back to the last century then mass unemployment scarred the economic landscape on several occasions and particularly so in the Great Depression. The credit crunch era initially brought higher unemployment but fortunately we managed to reduce that over time. Indeed from around 2013 we saw considerable improvements on that front in mnay countries. The leader of the pack in this regard has been Japan where the unemployment rate has fallen as low as 2.2%. The UK and US saw strong improvements too with the unemployment rate falling below 4%. More latterly the Euro area has seen unemployment fall too although its progress has been slower leading to its unemployment rate being more like 7%
That was the good news section of the labour market as employment rose and unemployment fell. Although there always was the issue of under employment as a cloud in the sky as we wondered what jobs were being taken and how employment is defined? The waters also had something of a shark in them as the strong quantity numbers were accompanied by at best weak real wage growth something my country the UK has been particularly affected by. Especially troubling is the way the establishment has responded which is to impose poorer measures of inflation ( the Imputed Rent driven CPIH ) to flatter the figures and mislead the unwary. Along the way the economic Ivory Towers had plenty of troubles too as the unemployment rate fell below their definitions of “full employment ” and made their “output gap” theories crumble. I am sure many of you still remember when Governor Carney of the Bank of England signposted a 7% unemployment rate as significant before exhibiting the sort of behaviour that led to him being called the “Unreliable Boyfriend ”
Last week this provided something of a forerunner of what we can now expect.As Politico points out below even that shock may have been an understatement.
Last week’s headline number of 3.28 million claims — itself a more than 1,000 percent increase — is also expected to be revised upward, in part because of stark discrepancies between data that states reported at the ground level and what the Department of Labor recorded.
Florida’s initial claims hit a record for the week ended March 21, and then tripled to 222,054 for the week ended March 28, according to the state Department of Economic Opportunity.Florida’s initial claims hit a record for the week ended March 21, and then tripled to 222,054 for the week ended March 28, according to the state Department of Economic Opportunity…..Florida’s initial claims hit a record for the week ended March 21, and then tripled to 222,054 for the week ended March 28, according to the state Department of Economic Opportunity.
So as you can see the situation in the United States looks as though it may be even worse than we feared even last week. The old saying that a week is a long time in politics is being outdone by economics at the moment.
Yesterday brought a moment to the UK which we had feared was about to arrive.
Nearly a million people have successfully applied for universal credit in the last fortnight, in a rush to welfare support that reveals the depth of the jobs crisis caused by the UK’s lockdown.
Despite the government’s job support schemes offering 80% of earnings to employees and the self-employed who cannot work, 950,000 people applied for the main income support benefit between 16 and 31 March. There are normally about 100,000 applicants for the benefit in any given two-week period.
Applications started flooding in as soon as Boris Johnson told the nation to stop non-essential contact with others and cease all unnecessary travel. ( The Guardian)
Care is needed here as these are social security payments rather than a labour force measure or indeed a claimant count but we do get a very string hint from the data here.Out of it there is at least a small positive.
The DWP said it had moved more than 10,000 staff to deal with claims and was recruiting more.
The numbers above compare to a situation only a couple of weeks ago when we were told this by our official statisticians.
For November 2019 to January 2020, an estimated 1.34 million people were unemployed. This is 5,000 more than a year earlier but 515,000 fewer than five years earlier. The small increase on the year is the first annual increase in unemployment since May to July 2012, and it was caused by a 20,000 increase for men.
Sadly we seem set to go through 2 million fairly quickly and maybe 3 million. However the numbers will need some interpreting because it looks as though those who are “furloughed” will continue to be counted as in employment. Personally I think it would be better if a new category was created.
Let me welcome the effort by the Office of National Statistics to produce some new data although sadly even the new weekly measures are of course now well behind the times.
Over a quarter (27%) of responding businesses said they were reducing staff levels in the short term in the period 9 March to 22 March 2020, while 5% reported that they were recruiting staff in the short term.
This mornings news from Spain was grim too.
MADRID (Reuters) – The rise in Spanish jobless numbers in March is the highest monthly increase ever recorded, Labour Minister Yolanda Diaz said at a news conference on Thursday.
The number of jobless jumped 9.3% from the previous month bringing the total number of unemployed people to around 3.5 million. That total number was still below record highs of 2013.
The recent better phase of economic growth for Spain had played its part in bringing unemployment down from a bit over 5 million to just over 3 million last summer. But sadly the mood music had changed and is now dark.
This is a grim phase with echoes of the 1920s and 30s. I fear for the unemployment numbers that will come from Italy which had its own economic problems ( the essentially 0% economic growth of our “Good Italy: Bad Italy” theme ) before the pandemic started. Some yesterday were promoting this as good news.
The unemployment rate slightly decreased to 9.7% (-0.1 percentage points) while the youth rate stayed stable to 29.6%.
Sadly they did not seem to have read this bit.
This press release is referred to February 2020, therefore it is related to the pre-COVID-19 health emergency phase.
Italy and many other countries are about to see a tsunami of unemployment and our best hope is that it will be brief.
Meanwhile maybe attitudes will change as the other day I looked up at a residential care home where a worker was assisting an elderly lady on her balcony. As she had no protective clothing I could see she put herself at risk. I was thinking of that as I read this from Sarah O’Connor in the Financial Times.
This precarious army labours around the clock. On Monday I spoke to a domiciliary care worker who visits bed-bound clients in their homes (she did not want to be named for fear of punishment by her employer). She was in the middle of a 10-hour shift, having worked 14 hours on Saturday and 14 on Sunday. “We’re all putting the effort in,” she said. She is paid £9.75 an hour at weekends and £8.75 in the week, which amounts to about £1,700 a month.
It got worse.
Unison, the union for many care staff, has been raising concerns about the lack of personal protective equipment. The care worker I spoke to had gloves but no mask; she had purchased her own hand sanitiser. Her company, which employs her on a zero-hours contract, would only pay statutory sick pay of £94.25 a week if she developed symptoms and had to self-isolate. “Before, I would have gone into work with a cold or a cough — now I’d have to stay off but then I don’t know how I would pay the bills.”
Let me say welcome back from maternity leave to Sarah who is easily the FT’s best journalist.
The Investing Channel