UK unemployment data poor, improvements are badly needed

Data today revealed that the UK unemployment rate has risen to 8.4%. Fewer jobless claimants emerged than expected, with only 1,200 claiming as opposed to  the 9,100 expected. This is scant consolation however, UK unemployment is at its worst level in seventeen years. So, what can the UK government do about it?

There are many measures than can and should be taken to address the UK’s chronic unemployment situation. Most obviously, the Bank of England should ramp up its quantitative easing programme, particularly with inflation likely to ease this year. This should hopefully increase bank lending and enable the private sector, specifically SME’s to pick up the slack that the public spending cuts are leaving in the job market.

We need to make the UK a more hospitable environment for employers, which means lowering and simplifying taxation and cutting out over-regulation, though the government’s hands are tied to large extent by EU law.

For the longer-term, youth unemployment needs to be looked at, which means improving the UK’s education system. It is widely accepted that we need to equip young people with the skills, training and experience that will make them essential to UK businesses moving forward.

Investment in infrastructure is another major opportunity, whether this is funded by cheap UK borrowing in the debt markets or preferably by attracting foreign investment; relations with China are building in particular. There could be huge job creation if projects in sectors such as energy and transport (e.g. high speed rail) could be initiated. House building was the driver of job-creation in the recovery from the Great Depression in the 1930's and this could be replicated; housing in London in particular is a real problem.

Unfortunately, the fate of the UK’s unemployed could well be out of domestic hands – so much depends on events in the eurozone. The risks of a financial collapse and European recession are growing every month. No amount of bold and creative measures to boost UK employment will be successful if the worst case scenario comes to fruition in the eurozone.

Richard Driver
Analyst – Caxton FX
For the latest forex news and views, follow us on twitter @caxtonfx and sign up to our daily report.