UK economic woes could see unemployment rise and wages fall again

Thu, 27/11/2014 - 14:07 -- nick

The UK's supposed economic recovery has been trumpeted endlessly by the coalition government.

It is almost as if they shout so loudly to drown out the voices of dissent, voices which were raised again yesterday as more information was released on the UK's growth figures.

At 0.7% for the last quarter, these looked pretty respectable, particularly when set against the ongoing troubles in the Eurozone.

When you dig a bit deeper though, they start to unravel.

The main reasons the economy grew were because people spent more, despite wages falling in value for years, and because government spending went up.

Those people who spend more than they earn are not going to push the economy in the right direction, and are likely to be borrowing more to finance their lifestyles.

Government watchers won't be surprised that, in the year before the general election, spending cuts have slowed down even if unemployed people feel no benefit because they have seen such draconian standard of living declines already.

But with both main parties trailing more austerity for after the election any boost to the economy from this is likely to be very short lived.

This is one of the main fears of economists, with Stephen Lewis of ADM Investor Services saying growth will probably "subside" and:

"These trends could not extend very far without putting the UK economy in jeopardy."

The problems come with the fact that exports have taken a hit, and particularly from a drop in business investment.

The UK has struggled to match Europe's level of business spending on new machinery and processes for years, and this means we are comparatively inefficient in our production.

We have no chance of improving productivity or exports without businesses investing more, and this impacts on all of us.

While unemployment is comparatively low here, without investment the quality of jobs being created is very low and too much is part time, and the TUC has shown that this is why wages are falling on average.

Workless people need to be able to afford to take the jobs on offer, but endless waiting and bar jobs aren't going to lift people out of poverty and can't provide enough income to feed and house individuals let alone families.

The fear must be that another downturn in growth will affect even the flow of low quality jobs, and unemployment will start to go up again as a result.

The economy is still sick despite the government's attempted misdirection.