By Maximilian Clarke

Rock-bottom consumer confidence fuelling retail sector employment decline; accelerating cuts to public sector jobs and business unwilling to boost headcount as Europe threatens to return to recession; have combined to push unemployment to a 17-year high.

The worsening employment crisis has sparked fierce debate on how best to stem the UK wide job losses. Business organisations had largely anticipated the rise, advocating the government perseveres with the deficit reduction programme; whilst trades unions have united in their condemnation of what they refer to as ‘state-sponsored’ attack on livelihoods for politically motivated reasons that are not based on economics.

Graeme Leach, Chief Economist at the Institute of Directors warns the figures will worsen, but that the Bank of England’s stimulus may fuel jobs growth:

“These are grim figures, and are likely to get worse before they get better. But abandoning the deficit reduction plan will do the unemployed no favours. The hope is that QE2 will lift the money supply and economic activity, but the ongoing eurocrisis is pushing the UK towards a double-dip with increasing speed. All this is before the threat of contagion has actually materialised. We are sailing in stormy seas.”

Jeremy Cook, Chief Economist at foreign exchange company, World First, considers the rise in line with expectations in light of the challenges facing the UK economy, though predicts it will further fuel the anti-cuts campaign:

“Although these figures are shocking there are some underlying reasons and knee-jerk reactions are never helpful. We expect some firms have cut older workers before new legislation makes it illegal for employees over the age of 65 to be excluded on the basis of age.

“Secondly, these job cuts were always expected in the public sector and have been earmarked by the coalition government for a long time. This will not curb calls for austerity measures to be loosened in the face of falling consumer demand and business confidence.”

Dr John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development (CIPD) predicts the pattern of long-term unemployment will create its own preblems, complicating the recovery:

“These labour market figures are truly horrific, with the economy shedding almost 15,000 jobs each week between June and August. The quarterly rise in unemployment is reminiscent of an economy in recession rather than any kind of recovery and confirms that the private sector just isn’t creating enough jobs at present to offset public sector job cuts.

“With 5.6 unemployed people for every job vacancy the labour market is back to where it was in the depths of recession in 2009 and the underlying problem is getting even worse given that 1 in 3 unemployed people have now been without work for over a year. Many more months like this and we’re likely to see the re-emergence of the kind of ‘Gissa Job’ economy that scarred Britain in the 1980s and 1990s.

“As the CIPD expected, youth unemployment didn’t rise by the 85,000 figure required to take the total above 1 million by the end of August. However, given the background deterioration in the labour market we now expect that milestone to be reached next month.”

The most damning interpretation of the grim figures came from Trades Union Congress chief, Brendan barber, blasting the coalition’s cuts agenda

“These are terrible figures. The government's austerity measures have turned unemployment into a full-blown crisis - with job losses not seen since the darkest days of the recession.

“Worryingly, this is not simply the result of Eurozone troubles. This unemployment crisis is state sponsored, and areas like the North East are paying a heavy price with more than one in ten people out of work.

“The news for those in work is bleak too, with wage rises falling back to just 1.8 per cent and creating an even tighter squeeze on living standards.

“The Chancellor's Plan A has sent unemployment to a 17-year high. This country urgently needs a plan B to get people back into work.'

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