The Financial Times on Unemployment

From an economics correspondent The Financial Times of Friday, January 20, carried an important editorial which examined in some detail the figures for unemployment which had been published the previous day. The arguments the paper used are an important counter to the rose-tinted-spectacle-type stories the papers generally carried that day. I have culled the significant parts of the editorial: ".eeeThe figures for mid-January are apparently reassuring. Total unemployment has now reached 600,000, or 2.6% of the labour force - with much higher percentages, of course, in Wales, Scotiand and Northern Ireland. But if one considers only those who are wholly unemployed; leaving aside school-leavers and those who are only temporarily without a job, and if one accepts the Ministry of Labour's allowance for purely seasonal factors, the January percentage comes down to 1.9% This is a good deal higher than the 1.2% of a year ago but not so high as to be politically intolerable. There has, moreover, been a marked slackening in the rate at which unemployment is growing. In October the seasonally-adjusted figure rose by 33,000 and in November by 47,000. But in December the rise dropped to 25,000 and the latest figure is up by only 5,000: the curve does seem to be levelling OUteccsecce "This may be a weight off Mr. Gunter's - and Mr. Wilson's = mind. But three reservations of differing importarnsemust be entered before these latest figures can be classified as encouraging. The first concerns the weather: we are not yet quite out of the period during which a spell of really bad weather can drive the overall unemployment figure (which includes those temporarily stopped) up to an embarrassingly high level and have a disproportionally large influence on Government economic policy. The second concerns the weather in a more technical sense. The fact that the winter has so far been relatively mild is a reminder that seasonal corrections mist be regarded with some scepticism: the apparent slowing-down in the growth of unemployment may be no more than a statistical accident. "The third and most important reservation concerns the probable trend of unemployment in the months ahead. Even if the violence of the initial shake-out turns out to have been short-lived, even if we get through the winter without unemployment rising to an emba®Sssingly high level, the odds are that the trend will continue to run upwards until the Government take steps to reflate demand. Production may level out and even rise a little, but it is unlikely to rise as fast as capacity: the latest forecast of industrial spending on new plant and eqipment merely confirms the general impression that the growth of national output this year will be slow, The rise in unemployment that this implies will be masked, once the winter is over, by the seasonal upswing in demand for labour. The Chancellor, if he gets through the next month successfully, may not have to worry much about the political repercussions of rising unemployment until the autum. But the trend will be there to remind him that, unless he finds a way of reflating demand selestively, unemployment will be higher still next winter."