The unemployment figures released yesterday provided mixed headlines this morning.  Some of the press focused upon the fall in unemployment and 30,000 fewer people claiming unemployment benefit.  These are good figures that provide some signs that the recession and the downturn are fading.  However as always the devil is in the detail.

What the headlines don't tend to indicate is that although unemployment fell, so did the number of people in employment.  Therefore the number of people working, earning and producing goods and services in the economy actually declined.

The two paragraphs above may seem inconsistent.  They are not.  The main reason that both unemployment and employment fell is that the total number of people in the labour market has been falling as the inactivity rate increased by 150,000 in the quarter and the number of overseas workers decline 100,000 in the year.  The rise in the inacitivy rate was driven by a 100,000 increase in the number of people registered as students.  Although this is preferable to redundancy, the majority of these students are not attending university or enrolling in rigorous higher education courses, many of these courses have been set up in the past year in the face of recession and are well known to provide little in the way of actual benefit to either the individual or wider society.  A cynical person might even argue that these courses are a very useful political tool to keep down the official unemployment figures. 

Finally the labour market stats also continue to show that it is the public sector that is creating the additional jobs, not the private sector.  Given the necessity for the government to cut its deficit, this is a temporary solution, and likely to be reversed.  Without a return of private sector jobs growth there will be no recovery in the labour market.

Its not all doom and gloom out there anymore and things are slowly getting better, but as ever it is easy to get carried away when misinterpreting monthly data!

http://www.statistics.gov.uk/cci/nugget.asp?id=12

An article released yesterday in the Financial Times shows the extent of the economic uncertainty that exists at the moment.

The paper sent a survey to leading UK economists asking broad questions about the outlook for the economy, employment, house prices, government spending etc.

The paper printed the responses from the various experts, and in typical economist fashion they came up with very different views for the economy.

For example, when asked whether 2009 would show the first "green shoots" of recovery in the economy, there was an almost even split between those answering yes and those answering no. Looking closer at the responses given the reasons for the responses were also very different.

Often the survey also seemed to suggest different interpretations of various economic terms led to different survey responses. For example, some respondents defined economic recovery as recording positive growth and others thought it meant seeing a return of trend growth. These are significantly different with the later being much harder to achieve.

This article has helped to confirm that we are entering a very uncertain time. I remain hopeful that we will see the first signs of recovery before the end of the year, but so much could happen to put this out of reach.

You may have to register with the FT web site (for free) but its worth having a read of this article.

Every day the news on the economy in the UK, the US and the eurozone just seems to be getting worse and worse. There seem to be few silver linings at the moment and the prospect of recession in the US, the UK and in a number of eurozone economies is becoming ever more likely.

The UK may technically just about avoid a recession but it is going to be a struggle. There are a number of adjustments in the economy that are going to happen before we start to see more normal economic activity.

Sadly we are only at the start of the economic downturn. There is likely to be at least another twelve months of pain. Housing prices will fall, unemployment will rise and the governments budget will be strained.

The main hope is that world commodity prices might fall as the world economy slows. Lowering inflation next year, giving consumers a break and providing the international central banks with the room to cut interest rates and stimulate growth. However, with the volatile nature of commodities at the moment I wouldn't like to guess where they will be in a years time - its hard enough to tell where they'll be in a weeks time.

Its all looking pretty grim at the moment. Here's hoping for a summer lull...