Do people just give up?
The Guardian is reporting this morning that “there were 32,300 fewer people receiving jobseeker’s allowance in February than in the previous month [...] The wider Labour Force survey measure, which also includes people out of work who are not claiming benefits, also fell, by 33,000 in the three months to January to 2.45 million, the biggest drop since July 2007.”
So far, so good.
However, further down in the same article, it is pointed out that “employment is down 54,000 to 28.86 million, the lowest level since 2006. A record 8.16 million people are now classed as economically inactive, which includes students, people on long-term sick leave and those who have given up looking for a job.”
So this really is not good news. Unemployment is down because people are not looking for jobs, not because more people are working.
It would have been useful to see figures for underemployment, too – other surveys have recently pointed out that more and more people are forced into part-time jobs.
What it looks like is that the regular jobs are disappearing. Some people get part-time jobs instead, but others move back to their home country, retrain (which means they’re counted as students), take early retirement, or just give up.
Selling books on Amazon
I own far too many books, so as an experiment, I decided to try and sell a few on Amazon to see whether it’s worth my while.
I put six books up for sale – fiction and non-fiction, hardbacks and paperbacks – a couple of weeks ago, but although I agreed to sell them at very low prices, I didn’t sell the first one till three days ago.
It was a paperback, and the price was £1.69.
However, that’s only vaguely related to what Amazon are paying me:
Buyer’s Price: £1.69
Shipping: £2.75
Amazon Fees: £-1.64
Your Earnings: £2.80
Envelope: £-0.33
Postage: £-1.04
Grand Profit: £1.43
Note how Amazon’s fee is almost exactly the exactly the selling price, so my profit is basically the difference between the fixed shipping fee and the actual cost.
Given that it must have taken me at least ten minutes to list the book on Amazon, print out the receipt, wrap the book and go to the post office, there really are better ways to make money.
So how do I get rid of a thousand books more easily and/or profitably?
Brown’s Enron-like constructs
Willem Buiter describes Brown’s economic legacy well in the Financial Times today:
Britain’s true fiscal circumstances are about as bad as Greece’s reported situation, once we allow for the understatement of UK public debt through the off-balance-sheet accounting tricks of the past decade (the private finance initiative, unfunded public sector pensions, student loans and other Enron-like constructs).
The fiscal weakness of the UK is largely government-inflicted, rather than a result of the financial crisis and global contraction. During the long boom preceding the crisis, fiscal policy was relentlessly pro-cyclical, with public spending rising steadily as a share of gross domestic product.
[...]
Public finances during the last boom are the obvious guide to expectations about the likely future fiscal behaviour of a Labour government. The cynical manipulation of Gordon Brown’s “golden rule” (over the economic cycle borrowing only to invest) and the decision to jettison it and the sustainable investment rule (net debt not to exceed 40 per cent of GDP) as soon as they threatened to become binding constraints will cause the markets to act like St Thomas towards promises of future fiscal tightening: seeing is believing.
Do read the whole thing!
I’m surprised that anybody can still think that Brown is the right person to get us out of this mess.
We were deceived: Q4 GDP was revised down, not up
When the revised estimate for Q4’s GDP growth was announced to be 0.3% (up from 0.1%), I was a bit surprised, because I didn’t think Q4 seemed to be all that wonderful.
However, Edmundo has now analysed the underlying figures and it turns out that GDP was actually revised down, not up.
His graph is not very clear, though, so here’s my attempt at explaining what happened.
The blue line shows the old estimates from January: Q3 GDP was estimated at some £313bn, and Q4 GDP at £315.845m, thus growing by 0.1%.
The red line shows the revised estimates from this month: Q3 turned out to be much worse than initially estimated, at less than £307bn, whereas the Q4 estimate was almost right, getting adjusted down to £315.712m, and the growth from Q3 to Q4 was therefore 0.3%.
In other words, GDP was slightly lower in Q4 than initially estimated, but the growth is much bigger because Q3 was much worse.
There is therefore nothing whatsoever to celebrate about the revised figures, and the ONS must have been deliberately lying to the public when they sent out a press release called “Services growth in December pushes up GDP estimate”, given that the GDP estimate was actually down.
Underemployment
The Independent’s Sean O’Grady has written a good blog posting about underemployment.
He thinks that the rise in underemployment (that is, people working less than they want to) is going to create a much more unequal society: “Those who have traditional full time secure jobs with a pension are increasingly a blessed minority – the rest of the nation is scrabbling away trying to get work where and when they can, with not even paid holidays, let alone a final salary pension scheme.“
I think he makes an error in dividing the country into those two groups, though.
He makes it sound like those with secure jobs are in that category forever. In reality, however, very few people are allowed to stay in one job forever, at least in the private sector. Five, ten or perhaps fifteen years, and then redundancy looms.
Interestingly, banks still treats a “secure” job as being secure when it comes to getting a mortgage, so people will try to get a mortgage during those years they have a “real” job, given that it’s almost impossible to get one if you don’t have one.
So to return to O’Grady’s divided society: I think the dividing line will be between those who either have a really secure job (such a schoolteachers) or have made enough money to live comfortably for the rest of their lives without working again, and those whose working lives will be a patchwork of studies, full-time jobs, part-time jobs, unemployment and self-employment, with the disastrous consequences for savings and pensions that this is likely to entail.
The Bank of England are lousy forecasters
I was, needless to say, not terribly surprised by yesterday’s jump in inflation.
Many commentators clearly believe the Bank of England’s forecast that inflation will come down sharply during 2010.
This is not really my expectation – so long as this country is depending on imports, and so long as the pound continues to be weak, I can’t see inflation dropping significantly.
However, it wasn’t till I read this article by Hamish McRae that I realised how lousy the BoE have been at predicting inflation in the past:
A year ago the Bank thought that inflation by now would be close to 1 per cent. Indeed the very top end of its expected range for the CPI was 3 per cent. So it has been completely wrong. And it has been wrong despite the fact that the recession has been somewhat more severe than it expected then. We all make mistakes, but that was a big one.
Actually, the Bank has been consistently underestimating inflationary pressures for the past four years. I have been looking at some work by Simon Ward, the economist of the fund management group Henderson, and he points out that the CPI has gone up by 2.8 per cent a year over that period, not the 2 per cent target that the Bank was supposed to attain.
Unless they’ve changed their computer model significantly recently, I guess this means we shouldn’t trust their forecasts very much. The model has probably been designed for boom times, and it isn’t able to predict bust-time inflation with any degree of accuracy.
Anyway, let’s see. My prediction is that CPI inflation won’t fall below 2.5% throughout 2010. Who would you put your money on? The Bank of England or the Widmann Blog?
The export boom that never happened
More than a year ago I blogged why I wasn’t convinced that a collapsing pound would solve all of the UK’s financial problems.
Today Edmundo then wrote a blog posting about the worsening trade balance.
He’s been quite optimistic in the past that the Bank of England’s strategy was right, so it’s interesting that he’s starting to realise that this recession will lead to the revision of many economics textbooks.
I liked the golf problem mentioned in his blog posting – it’s something which has been overlooked by most observers:
One person recently explained this phenomenon to me as a golf problem. British managers, he said, are too fond of golf. When profits are good, unlike many of their overseas counterparts, who go out and seek further opportunities, they take to the golf course rather than trying to build on those profits. So a devaluation invariably fattens their profits rather than prompting them to expand market share. Anecdotal and vague as this social observation is, there is some grounding in economic evidence: Britain does, according to economist Bill Martin, have a historical tendency to import more and export less as its economy grows.
Japanese levels of debt
McKinseyQuarterly has published a scary article (free registration required) that shows how the UK’s debt (private and public sector) has now reached Japanese levels, far higher than other Western countries, including to the US. (Hattip: Guy Fawkes’ blog.)
I’m not sure how serious this is in its own right. For instance, for Japan it is often said that the massive debt is less of a problem because most of the creditors are Japanese, too. However, this is unlikely to be the case for the UK.
All that I can see is that if the UK’s debt needs to be reduced to American (or just French) levels, it’s going to be very, very painful.