tony's blog

Thursday, February 10, 2011

A Painful Process

Looks like the austerity measures are finally starting to kick in. It’s only now that the real effects of Government’s action to reduce the deficit are beginning to be felt. And boy, does it hurt.

Street cleaning and rubbish collections are to be reduced, some 500 libraries and hundreds of sports centres are set to close along with thousands of services for disabled, the mentally ill and elderly as authorities are obliged to slash their budgets by as much as 25 per cent this year. The fallout will have a huge impact on jobs with suggestions that at least 150,000 jobs will be lost in local authorities in the next two to three years (total 410,000 public sector job cuts).

So the pain begins. And it could take a number of years to flush this hurt through the system.

My question is what will be the impact on wider unemployment statistics? Previously Mervyn King suggested that the private sector would take up the slack and would be in a position to fill vacancies from refugees from the public sector. Sadly, as I’ve said before, I don’t think this looks feasible. The CBI concur with my view and suggest that the unemployment rate will jump from 7.9 per cent to 8.4 per cent as the private sector struggles to offset public sector job losses as well as providing for new entrants into the labour market. Its summary is that unemployment will not start falling for two years.

Clearly this is worrying. Especially since many analysts are suggesting that the economy will not grow as quickly as the OBR have suggested raising fears of a jobless recovery.

Let’s hope the Government take notice.