MARK Carney has unpicked the key defining test of his controversial “forward guidance” policy, with low UK interest rates no longer solely dependent on the number of people out of work.
The governor of the Bank of England officially broke the link last week, but in reality his hand was forced in January, when latest figures showed a sharp fall in the jobless rate to 7.1 per cent. Unemployment is now just a whisker away from the 7 per cent threshold Carney set back in August as the trigger point at which the Bank would start considering rate increases.
No-one anticipated such a rapid decline in joblessness, least of all the Threadneedle mandarins, who thought it would take until 2016 to reach that target. Carney has had a lot of explaining to do, but the headline figure points to an economy generating jobs at a faster pace than previously thought. Scotland continues to boast an even lower unemployment rate of 6.4 per cent.
Amid all of this, it is easy to assume that unemployment is coming under control, but for many young people this remains a jobless recovery. Twenty per cent of 16 to 24-year-olds – 920,000 people – currently want work but can’t find a job. Some 733,000 of 18 to 24-year- olds are unemployed, and 1.67 million are economically inactive; they have no job but since they’re not looking for work, they don’t count as unemployed.
Various studies have documented the costs of persistently high and long-term joblessness among the young. The Association of Chief Executives of Voluntary Organisations’ commission on youth unemployment estimates that during the decade from 2012 onwards, the Treasury will forego £28 billion in tax takings from lost economic output. The mental scars left on the jobless – depression, anxiety and self-harm – have been laid bare by the Youth Index produced for the Prince’s Trust charity.
As the least equipped competitors in an intractable labour arena, the young are bearing the brunt of the unemployment burden. Perhaps the latest jobless figures, due out this week, will show some improvement, but it would be wrong to believe this problem will naturally unwind as the economy picks up. According to the Institute for Public Policy Research, youth unemployment in the UK was steadily increasing relative to adult unemployment long before the financial crisis hit. From one-and-a-half times the adult rate in 1989, it reached three-and-a-half times the adult rate in 2005. In other words, this is a structural problem that can’t be solved through tinkering.
Tackling youth unemployment became a cause célèbre after the jobless total topped one million in late 2011, with the introduction of many training and apprenticeship programmes. These initiatives should not be allowed to die a quiet death, but do need to be sharpened into a more joined-up approach. «