We now have the detailed unemployment figures for December. The headine numbers are that seasonally adjusted unemployment in the UK fell by 19,700 in the month. On the surface this is a surprisingly good result. National unemployment now stands at 5.8%, while in Birmingham it is over twice this level at 12.8%. Within Birmingham unadjusted unemployment fell in 30 of the 40 Wards in December. Sadly in Acocks Green it rose by 13 to 1,336 or 12.1%. This is up 320 on the year.

The fall in unemployment, modest and patchy though it is, has surprised economists, because unemployment usually keeps rising well after economic recovery starts. While growth probably resumed in the final quarter of 2009 (we dont have the figures yet), it would have been weak at best, and certainly not enough to generate extra jobs.

The explanation of what is going on, seems to be that in fact the economy has not been generating extra jobs. Instead there has been a combination of:

1) Employers keeping staff by putting them on short-time working. Eaton Electrical, one of Acocks Green’s biggest private sector employers, has done this throughout 2009.

2) A growth in part-time working. Nationally part-time working has reached a record high of 7.71m, of which at least 1m would rather have a full time job, but cant find one.

3) Increasing impact of the Government’s make work schemes. A good example is the Future Jobs Fund, which Birmingham is using really well, to cut youth unemployment.  

There are good and bad sides to all this. On the positive side, its good news that fewer people (and especially young people) are out of work, than we would have expected from the savage recession we endured in 2008-9. It will lessen the long-term damage, as more people will keep the work habit, and are less likely to become long-term unemployed, than in previous recessions.

The less positive aspect is that it reinforces the concern, that the recovery is going to be slow and painful. The huge amount of public spending used to keep the economy going (in part on schemes like the Future Jobs Fund) will have to be cut back as the economy recovers. This means public sector employment (Birmingham City Council included) will fall substantially as a result. In the meantime, as the private sector recovers, it will prioritise getting staff back on full time before employing new staff. So while the peak level of unemployment may be lower than anticipated, it is very hard to see how it will return to 2008 levels any time soon.

Meanwhile whoever wins the General Election later this year will have to walk a difficult tightrope managing the economy, and in particular dealing with the huge government deficit. Cut it too soon (as I fear the Tories would) and you risk choking off the recovery before it develops sufficient strength. Cut it too slowly (as I fear Labour would) and you risk international fears about UK government debt, leading to rising interest rate costs and a falling pound. In such circumstances, I am sure the best man for the job would be Lib Dem Treasury Spokesman Vince Cable. He had the foresight to see what was coming back in 2007, and is the best placed politician to get us out of the mess we are now in.