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Markets are at the heart of the Tower Hamlets economy.
Markets are at the heart of the Tower Hamlets economy.

Economy sluggish as unemployment stagnates

THE UK UNEMPLOYMENT rate has remained virtually unchanged over the last quarter for which figures are available. The official figure stood at 1.56 million at the end of February – down just 45,000 over the previous three months.

To have over one and a half million workers unemployed is a huge figure – and to that must be added all those who are not working but not registered as unemployed, and those who are under-employed in part-time or zero hours contracts. This rate of unemployment drags down the economy in two ways.

First, the unemployed people are not earning a wage which they can spend on domestically produced goods and services – which would perk the economy up.

Second, the unemployed people will be claiming welfare benefits, which are taking a large part of public money. Expenditure on benefits is really an investment in the economy: unemployed people spend their benefits, so despite their economic inactivity, they do contribute to keeping other people in work. Also, if they were to enter low paid work, they would probably still be entitled to benefits – but different ones. Having said all of this, the figures suggest that the Government may be looking to make further cuts in out of work benefits.

The news about unemployment has come just days after it was confirmed that inflation has crept above the Bank of England’s 2% target to 2.3%. This has the effect of cutting the size of wage increases – further slowing down the economy as workers have less to spend. Wage increases are beginning to slow anyway: the current annual rate of growth is down to just 0.1%, the lowest for over two years.

The only (slightly) good news is that employment has shown a slight increase again. There are now 31.8 million people officially in employment in the UK, thanks to a tiny increase of 39,000 over the last quarter. The employment rate is at an all time high, bubbling just under 75%. The figure can be misleading, as it does not reveal how many of these workers have part-time jobs.

The Government has welcomed the unemployment figures, but leading economists have warned that inflation and minimal pay rises will knock back the consumer spending which has caused some of the more recent positive figures about the economy.

Peter Dowd MP, Labour’s Shadow Chief Secretary to the Treasury, warned that the increase in inflation was of great concern. He said that an incoming Labour Government would increase the Living Wage to £10 an hour.

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