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UK — Rise in unemployment toward 3 million in the next two years a distinct possibility

01 July 2010

Dr John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development (CIPD) comments as follows on forecasts for UK general government employment and total UK employment for the period to 2015-16 published 30 June 2010 by the Office for Budget Responsibility (OBR):

"At last we have a soberly realistic official assessment of the likely impact of fiscal deficit reduction measures on public sector jobs. The OBR forecast for public sector employment to 2015-16 is close to that made by the CIPD both before and after the General Election. By contrast, however, the OBR forecasts for growth in total employment look optimistic."

"As the CIPD also said during the General Election, a dynamic economy with almost 30 million people in work, which in a normal year is capable of more than making up for the 0.5 million jobs lost as a result of annual improvements in labour productivity, should be able to cope with a phased period of large scale public sector downsizing without this resulting in higher unemployment. But a favourable outcome depends on a return to health of the wider economy and increased demand for labour from the private sector."

"The conditions necessary for such a favourable outcome are at present far from self-evident and unlikely to emerge simply as a consequence of swifter and tougher action to reduce the deficit. On the contrary, historical precedent would suggest that the application of stronger fiscal discipline to an economy in too weak a state to bear it, will both slow the rate of economic growth and stem the pace of job creation. Consequently, the employment outlook is likely to be far weaker than the OBR forecasts and the coalition government hopes, with a rise in unemployment toward 3 million in the next two years a distinct possibility."



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