Duncan’s Economic Blog

The Lost Half Decade: Unemployment expected to be 770,000 higher in 2013

Posted in Uncategorized by duncanseconomicblog on August 31, 2011

As regular readers will be aware I am quite a fan of the monthly round up of independent economic forecasts published by the Treasury.

The August edition was published two weeks ago and contained the tri-annual additional set of ‘medium term forecasts’ out to 2015. These make for depressing reading.

The table below shows the average growth forecast for each year out to 2015 both as they currently stand and how they were just six months ago in February.

Not only has 2011 been downgraded (in a very substantial manner) but so has growth in each of the subsequent years.

To make these numbers more ‘real’ I’ve also included the medium term forecasts for claimant count unemployment in each year, as they are today and how they were six months ago. The orange bar is the difference between the forecasts.

The effect of the downward revisions to 2011, 2012, 2013, 2014 and 2015 is to move the peak of unemployment back a year from 2012 to 2013.

Unemployment in 2013 is now expected to be 770,000 higher than it was just six months ago.

I’m rather surprised this hasn’t generated more headlines.

UPDATE: 5th September – It seems that since I wrote this post the Treasury have re-issued their August forecast document.

It looks like their summary data included an error (including an ILO rather than claimant count figure) and rather then unemployment being 770,000 higher in 2013 it will be a ‘mere’ 130,000 higher.


2 Responses

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  1. Chris Kulbaba said, on August 31, 2011 at 11:30 am

    I am not an Economist nor do I pretend to truly understand the science of it, but someone once said to me that Economists are very good at predicting what is happening right now, and other than that it is similar to a weather forecaster…no offense intended, I am just stating my ignorance in the profession.

    My view is that of an employment professional, and I want to ask why the sudden downshift is predicted in 2014. One thing I can tell you is that through employment processes there are several factors, and that they are innumerable and so very hard to predict, and most of them are of the individual. Perhaps the sudden downshift in 2014 is the ability of many job seekers to use Social Media effectively?

    I am curious to see the debate and discussion, this looks like a fantastic topic to debate on – I cannot say I can add to the conversation, but I am looking forward to listening.

  2. jomiku said, on August 31, 2011 at 2:49 pm

    In the US, the same graphs do draw comment, but not as one might hope. Here’s a short list of how that issue has been going here:

    1. The claim that it’s structural. Two general camps there, the macro people who can’t accept the evidence for a failure of demand and who need to find ways to justify the intellectual edifice’s they’ve built their careers and self-worth on plus the liquidationists, meaning the libertarian types allied with the Austrians. In other words, a combination of denying reality meeting “it’s God’s will” expressed as a series of economic statements about the natural order. Both come to the conclusion that there’s nothing to be done.

    2. The claim that any remedy costs too much. Even a tax credit for hiring or a reduction in payroll taxes. After all, the debt is the main concern, screw what happens to people. I might put in this category the statements by leading Republicans that FEMA aid for hurricane-related relief must be offset by spending cuts elsewhere. They don’t mean “take the money from my district” but “take the money from social programs elsewhere.”

    3. The solution – here’s the scary part – is being presented by the Republican Party as a series of beliefs which if enacted would generate amazing growth. (As PT Barnum said, there’s a sucker born every minute. In this case, remember that America is highly sensitive to religious appeals.) This means eliminating the EPA because environmental restrictions are a cost and restrict the freedom – which God wants us to exercise – over the resources within our dominion. God will reward us. The leading candidate is against nearly all federal activity, says that Social Security is unconstitutional, etc. So while reasonable minds argue over the best ways to address unemployment, the party seeking power has a belief-based agenda. Any evidence in history that this kind of thing ends well?

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