Economics Commentary Essay

Sharp climb up in un job as financial crisis hits pipelines groceryBritish unemployment today posted its biggest rise since the beas give way recession 17 years ago as the financial crisis filtered through to the telephone circuits market.Official figures showed unemployment measured by International travail Organisation (ILO) standards rose by 164,000 in the three months to heroic from the previous(prenominal) quarter to stand at 1.79 million. The rise took the jobless rate up half a percentage point to 5.7%, likewise the biggest jump since July 1991.These verse ar truly horrendous and much worse than I had feargond, verbalize David Blanchf let down, a labour market expert and member of the Bank of Englands financial policy committee.He told guardian.co.uk his earlier prediction that unemployment would rise to 2 million by Christmas now looked conservative. Unemployment will be higher up 2 million by Christmas. I am particularly worried at the 56,000 rise in the nu mber of young un busy nation. These are nurture leavers who are unable to get a job or fill benefits, which is why the claimant count has non risen even faster than it has, he said.The number of Britons reveal of work and claiming jobless benefits rose by 31,800 last month to 939,000, the eighth monthly increase in a row, and Augusts rise was revised higher to 35,700. The City had expected a 35,000 increase for September.This so-called claimant count measure is always lower than the broader, internationally recognised ILO measure which includes hatful non claiming benefits, because some unemployed people are not entitled to claim benefits, or choose not to do so.The rise took the claimant count jobless rate up to 2.9%, its highest take since January 2007.The prime minister, Gordon Brown, responded to the figures this morning by pledging the government would do everything it could to create jobs in the UK thriftiness, which is teetering on the brink of recession.The governme nt also announced today it was do an extra 100m available to retrain workers who lose their jobs.The employment minister, Tony McNulty, said the jobs data painted a tough picture of the UK saving But the job is to look forward and see how we raft deal with any drop down in employment rather than talking active the causes.The number of employed people dropped 122,000 to 29.4million over the three-month period.The FTSE 100 fell much than 3% this morning, wiping out all of yesterdays gains. The mood darkened after the unemployment figures, and the superpower of leading shares fell more than 150 points to 4235.6.The Liberal Democrats work and pensions spokeswoman, jennet Willott, urged the government to turn its attention to unemployment and inflation, now the banking rescue package had beeen agreed. reliable families across Britain are suffering, not just those working in the determine Mile. As the number of vacancies shrink, it will be harder and harder to get people suppor t into work. It will not simply be a case of prepare the unemployed if there are no jobs for them to return to, she said.The number of job vacancies dropped by 62,000 from a year ago to 608,000 in the three months to September. And 147,000 people faced redundancy in the three months to August, up by 28,000.For many an(prenominal) people, a bleak Christmas lies ahead as the fallout from stockmarket turmoil spreads to the roost of the economy.Brendan Barber, the general secretary of the TUC, said We are now seeing the topic of the credit crunch on the rest of the economy. I fear that the entire economy will soon feel the impact of the problems in the banking sector.He urged the Bank of England to cut interest rates again to avoid a tremendous recession.Derek Simpson, the joint general secretary of the Unite union, said authorities intervention should not just stop with the banks. Action across the wider economy is necessary to protect jobs and the economy in a recession.Alan Cl arke, UK economist at BNP Paribas, said If you look at the claimant count number, it wasnt as bad as expected, exactly if you look at the ILO, it was simply awful. These numbers are falling off a cliff.In a sign that consumer set inflation now at a 16-year high of 5.2% is not victuals into wages, annual average earnings growth slowed to 3.4% in the three months to August, its weakest in five years.As for pay pressures, the average earnings numbers stick around very subdued, said Philip Shaw, the chief economist at Investec. The labour market appears yet again not to be an inflationary threat to the economy which helps to justify the cut in interest rates last week.Economists conceive it is going to get worse. Thousands of jobs are being lost in the City, where banks hurl merged or collapsed, and on the high street, where growing numbers of retailers are going bust.Manufacturers laid off 46,000 workers in the three months to August, taking the tot number of manufacturing job s to 2.87million, todays figures from the Office for National Statistics showed.Job losings are spread across the economy, with Cadbury announcing 580 job cuts this week and ITV cutting about 1,000 jobs. The Centre for Economics and Business Research estimates 62,000 financial jobs will be lost by the end of next year.Nigel Meager, the director of the Institute for utilisation Studies, said No part of the country is spared. Much attention has concentrate on high-end jobs in the City. In an economic downturn, however, the real human damage is likely to hit lower-skilled workers who come about it harder to move into another job and take a crap less of a financial cushion to see them through fractious times.As vacancies continue to evaporate, competition for any job available will become fierce and the existing long-term unemployed, as well as young people entering the labour market will be particularly disadvantaged.CommentaryOne of a governments macroeconomic goals is low level s of unemployment. Another way of expressing this is to say that governments desire full employment in its economy. Unemployment exists at heart an economy when there are people who are registered as willing, capable and ready to work at the market elucidation wage, but unfortunately do not hold any jobs.The above article deals with the sudden fall in the employment rates occurring in Britain, affecting the stock market, the government expenditure, the redundant employees, and the Britain economy itself. This sharp rise in unemployment has been caused primarily due to the global credit-crunch.Underemployment could also be occurring in the Britain economy since workers wanting full-time jobs would be able to find plainly part-time employment. This would thereby result in lower wages and lower output for each worker.Demand-deficient or cyclical unemployment, which has taken place in Britain, has occurred due to a lack of sufficient goods and services being indigenceed, as well as a poorly operating labour market.This Demand-deficient unemployment is illustrated in the figure belowHerein, the causal factor resulting in disequilibrium unemployment is that labour markets are not working very smoothly. This is so because of the financial crisis, which resulted in companies aiming to live up to cost-cutting measures, and thereby resulting in the labour resisting such wage cuts. Since workers are not passive commodities, the income wages will go up easily but will refrain from falling this is because they are sticky downwards. In the above diagram, the demand for labour falls from ADL1 to ADL2 due to the fall in demand for goods and services. But as mentioned earlier, the workers real incomes do not fall to W2, so long as equilibrium is not attained. This therefore results in the disequilibrium unemployment of Q2- Q1. structural unemployment has also occurred in Britain as the structure of its economy has undergone a severe change. With the degree of unemployment being very serious, Britain is seeing a significant way out of jobs in the real estate, Information technology, and food industries. This is very bad for the economy since this situation can remain for another few months.The Britain government may use the aid of a variety of strategies to reduce the unemployment. This government can provide some aid to the employers and also encourage trade in creating employment. Structural adjustment policies can also be intentional to conform labour skills with the needs of employers, such as retaining schemes and appropriate use of technology Gordon Brown has already chosen this step by announcing 100m for retraining. Even policies designed to stimulate the levels of aggregate demand, such as the use of fiscal and monetary policies, will prove powerive in mitigating the effects of this disaster.But nevertheless, the British government will find the goal of full employment tall(prenominal) to achieve. This would be to reasons such as the unavoidable occurrence of inflation when nerve-wracking to reduce demand-deficient unemployment. The limitations of using Fiscal policies to raise the Aggregate demand would also hinder the act towards attaining full employment. Examples of these would be time-lags and the crowding out effect.The short-term impacts of this situation would include reduction in the government expenditure, arising due to more money being provided as unemployment benefits and also due to less taxation revenue being received by them. Another short-term effect would be the opportunity cost arising in terms of output done for(p) and the indisputable inefficiency.The long-term impacts of this sudden unemployment include the individual and social cost born primarily by the unskilled and lowly-paid workers. These workers will certainly find it difficult to look for suitable jobs in the future. Even the impact on poverty and income distribution is enormous, due to a large volume of workers within the primar y sector being made redundant. In Britain, for example, a majority of the real estate workers are being dismissed. Thus there has caulescent an unequal impact of unemployment in terms of region, urban/rural, gender, race and age. This could be particularly hazardous for in determining the racial distribution of Britain.