Blog

The road to a jobs recovery is longer than it seems

James Plunkett

This post originally appeared on the Huffington Post

For anyone hoping to sift a nugget of gold from recent economic data, employment stats have been the place to look. In the past year, the number of people working in the UK has risen faster than at any time since 1989, a remarkable performance from an economy with close to zero growth. Not only have these figures befuddled economists, prompting much debate of a productivity puzzle, but they've also encouraged a sanguine view of the jobs recovery. As the prime minister and leading commentators have been fond of pointing out - and rightly so - employment is now back to pre-crisis levels, making this one of the few economic indicators not keeping the Chancellor up at night.

Yet step back from a narrow focus on the number of people in work and the challenge we face on employment is daunting.

Gavin Kelly

This post originally appeared on Gavin's New Statesman blog

What role did high levels of household debt play in generating the crash and what do they mean for our economy over the next few years?

Well-worn questions, you might think. And no shortage of people have asserted answers. Following 2008, a whole new crunch-lit genre of books emerged to explore this. There is – or perhaps, was – something of a post-crash orthodoxy that the rise of easy credit, fuelled by run-away rewards for the super rich, and a squeeze elsewhere, encouraged ever greater borrowing.

A favoured narrative, often echoed by the coalition, is that debt ballooned as consumers (and home buyers) went on an irresponsible binge – it was all demand-led. Others argue, particularly in the US, that exploding debt reflects an act of policy – whether explicit or implicit – to increase the supply of easy credit for low and middle income groups who were seeing their wages stagnate. From this perspective, it was less a story of families living beyond their means and more about coping when their means stopped growing.

James Plunkett

This post originally appeared on the OECD blog

How did inequality and household debt interact in the run up to the 2008/09 financial crisis? Today, a new report by NIESR for the Resolution Foundation provides new evidence on that question for the UK. The new analysis confirms the severity of the borrowing situation of low income households in Britain before the crash and raises difficult questions about patterns of consumption in an era of high inequality.

The report’s key contribution is to dig beneath headline figures for household debt to describe the borrowing picture for households at different points in the income distribution. It’s well established that UK household debt, in common with many other countries, ballooned in the late 1990s and 2000s, with the aggregate savings ratio—the percentage of household disposable income that is saved—turning negative in 2008 for the first time since records began. Yet so far these headline figures have been something of a black box.

Low growth implications for living standards particularly bleak

James Plunkett

This blog originally appeared on Left Foot Forward

This morning’s weak Q2 stats (pdf) would be worrying in any recovery. But in the aftermath of such a deep fall in output their implications for real trends in living standards are particularly bleak. The UK economy still has a long way to climb back to pre-recession levels of output. Chart 1 below (now updated from a recent post to include Q2 stats) puts the scale of the task in perspective.

A gloomy prognosis for Q2 growth stats

James Plunkett

This blog originally appeared on The Spectator

Next Tuesday the ONS releases its first estimate of second quarter UK GDP growth. It may be a slight exaggeration to call it a ‘make or break’ moment for the Chancellor but ‘make or brake’ might not be a bad description. After six months of no growth another three months of flat GDP would strengthen calls to slow his current economic strategy. A variety of posts are already pointing to gloom among forecasters. Figure 1, which readers may have seen in similar form before, sets out the severity of the situation in contrast to previous recessions. This was the sharpest, deepest downturn in living memory; we badly needed a similarly strong recovery.

Britain’s Recovery Rests On The Shoulders Of Suburbia

James Plunkett

This blog first appeared in Business Insider

Enfield, North London is trademark British suburbia. Middle-income but with patches of poverty and patches of wealth, the high street is dominated by chain stores and a scattering of chain-owned pubs. On first sight, there are few signs here that the UK is recovering slowly from a deep recession. But look closer and things don’t look so good. The local council is one of many in Britain to adopt the policy of dressing up closed-down storefronts to resemble thriving local stores. With many of the facades now entering their third year, some are faded and peeling. On one, a scribble of graffiti backs the ‘BNP’, a far right fascist party.