Unemployment and the Credit Crunch

Transcription

1 Unemployment and the Credit Crunch The impacts of local economic fluctuations often take several years to be felt across the wider global economy. While the subprime crisis in the American housing market was first acknowledged as early as 2004, it is only now that we are seeing the effects on a global scale. Four years on and with the world s economic cycle heading into recession, the UK economy is bracing itself for a major economic slowdown. Inflation in September 2008 was at 5.2 per cent - the Government s target is 2 per cent - house prices have fallen at their fastest rate since 2002, mortgage lending levels are at their lowest in nearly four years, and the FTSE 100 index has crept below levels registered in Not surprisingly, unemployment is rising. The credit crunch has lead to plummeting levels of business investment. Complementing this, consumer confidence is falling, affecting demand across all sectors. Industry is now seeking to cut costs, with the inevitable effect of reduced working hours and wide scale job losses. The European Union s Lisbon Strategy outlines an objective for Europe to become, by 2010, the most competitive and the most dynamic knowledge-based economy in the world. In order to achieve this every member nation is set the objective of maintaining an employment rate of above 70 per cent Currently, the UK has million people in employment, representing a rate of employment % Change (Oct 07 Oct 08) Rank Unemployment rate Top 10: 1 Crawley Mid Sussex Fareham East Staffordshire Adur East Dorset Purbeck Tandridge Poole South Derbyshire % Change (Oct 07 Oct 08) Rank Unemployment rate Bottom 10: 397 Camden Ceredigion Hackney Lambeth Boston Western Isles Brent Southwark Cambridge Slough Source: Local Knowledge of 74.4 per cent. This is 4.4 per cent (or 1.74 million people) above the Lisbon Strategy target. Based on current rates of unemployment, the UK would need to see unemployment rise to around 3.6 million in order to contravene the Lisbon Strategy target. Until recently this level of unemployment seemed inconceivable, however this picture is changing at an alarming rate. Out of work individuals in the UK currently total million, giving an unemployment rate of 5.8 per cent. This is the highest rate for eight years. Furthermore, the quarterly rise in unemployment, from July to September, of 140,000, was the largest quarterly increase in the UK since the early 1

2 1990 s the last time the UK suffered from a recession. There are widespread expectations that unemployment will continue to rise, and will break the 2 million mark by Christmas, with further predictions that unemployment will reach 3 million by early Alongside the unemployment figures we have seen an increase in claimant count figures, with an additional 36,500 individuals claiming unemployment benefits over the last month and 154,800 over the last year; and falling vacancy levels, with job vacancies down 53,000 over the last month and 128,000 over the last year. The largest falls in employment thus far have been seen in distribution, hotels and restaurants and finance and business services. Also badly impacted in terms of increased redundancies and reduced vacancies has been the construction industry. If we analyse the geography of unemployment change in Great Britain obvious trends can be seen. The map opposite shows how changes in levels of unemployment vary between districts. The map shows that the majority of districts with the highest increases in unemployment rates the darker the colour the greater the increase in unemployment over the last 12 months are to be found in the south of England. Areas of Northern England, Wales, and Scotland also feature areas experiencing increases; however, the south of England has by far the highest proportion of districts experiencing large increases. Looking more closely at the south of England, it appears that a cluster of counties, Hampshire, Dorset, Wiltshire, Surrey and West Sussex have been affected most prominently. Indeed, of the 43 districts displaying the highest rate of change nationally, half are to be found within the borders of these five counties. Staffordshire is the only county outside of this cluster to feature a notable presence in this list. On the face of it this finding may appear somewhat surprising. Much of the attention on job losses in the national media has been on redundancies in the City of London, and amongst businesses 2

3 based within other major conurbations such as Birmingham and Manchester. Given these job losses we may therefore have expected to see high rates of change in the unemployment rate within London and the UK s core cities. However such a trend is not yet apparent with, for example, most of the London s boroughs failing to register significant shifts. Indeed, five London boroughs feature amongst the best ten performers, with the unemployment rate actually falling in Lambeth, Brent and Southwark. This is because redundancies by workplace do not necessarily impact upon the local resident workforce. Because of the high levels of in-commuting into London and other major cities, it is the suburban districts (with high net outflows of workers) that suffer most. Another feature of the current economic downturn is its impact on consumer confidence. This itself is having a significant effect on unemployment locally. The fall in demand for new housing and commercial floorspace has affected the construction sector. The slow down in economic activity has troubled the transport and distribution sectors. This lack of consumer confidence has also seen reduced expenditure on entertainment, affecting the hotel, leisure and restaurant sectors. Therefore any district relying on high levels of local spending and consumption will be at risk. Looking at the worst affected districts, they all appear to have an above average proportion of workers employed in those sectors most affected by the recession - whether these workers are employed locally or elsewhere. It is clear the economic slowdown is affecting different places in different ways. As the recession deepens, it will be important for regional and local agencies to assess their exposure, both to job losses within local businesses and increased unemployment within the local workforce. It will also be important for Government s national response to be targeted at those areas that are most at risk. 3

4 Case Study: Fareham vs. Cambridge With an increase of 71.4 per cent Fareham, in Hampshire, has experienced the 3 rd highest increase in unemployment rates over the last year. Using the spider charts to the right we are able to look more closely at Fareham. When the national average is represented by the 50 th percentile line, we see that the district has an above average proportion of its resident workforce employed in banking, real estate and construction. Interestingly Fareham also has very high numbers of individuals working outside the district. This would suggest that the unemployment figures for Fareham do not necessarily reflect job losses within Fareham itself, but job losses in neighbouring Southampton, Portsmouth and Gosport. Cambridge, on the other hand, ranks as one of the best performing districts in the country, in terms of unemployment change, with unemployment actually falling over the previous 12 months by 7.14 per cent. Levels of employment in construction, transport, and banking are well below the national average. Cambridge does, however, have a high proportion of residents working in the hotel industry, suggesting that, with falling unemployment across the district, tourism in the locality has not yet suffered, despite the current economic climate. The district also has a large inflow of workers, with few residents working outside the district itself. It would appear so far that the economy within Cambridge is proving sufficiently diverse to stand up to the effects of the economic downturn. 4

5 Case study: Crawley Crawley ranks as the district with the highest growth in unemployment in the UK over the last 12 months. Since October 2007 the unemployment rate in Crawley has doubled from 1.25 per cent to 2.5 per cent. This increase in unemployment over the last 12 months is almost four times higher than the national average of per cent. The previously low unemployment rate in Crawley now sits above the national average of 2.24 per cent. Looking at the spider diagram we are able to get a better understanding of how this change has come about. As a district Crawley has levels of employment in banking, real estate, transport and hotels well above the national average. These are all sectors of the economy that have been hit particularly hard by the economic downturn. Crawley also has a very high proportion of workers employed in large businesses, with XL Airways, Zoom, and First Choice for example, making large scale redundancies of late. Crawley also appears to suffer from high levels of business closure. The map on the right shows the percentage change in the unemployment rate over the last 12 months, benchmarked at a ward level. It is clear from this map that communities across the entire district of Crawley have been affected. Dealing with the effects of rising unemployment will place considerable pressures on local authorities and local services providers. 5

6 Unemployment Barometer Annex Change in Unemployment Rate: October 2007 October 2008 District Change (%) Nat. Rank Aberdeen City Aberdeenshire Adur Allerdale Alnwick Amber Valley Angus Argyll and Bute Arun Ashfield Ashford Aylesbury Vale Babergh Barking and Dagenham Barnet Barnsley Barrow-in-Furness Basildon Basingstoke and Deane Bassetlaw Bath and North East Somerset Bedford Berwick-upon-Tweed Bexley Birmingham Blaby Blackburn Blackpool Blaenau Gwent Blyth Valley Bolsover Bolton Boston Bournemouth Bracknell Forest Bradford Braintree Breckland Brent Brentwood Bridgend Bridgnorth Brighton and Hove Bristol Broadland Bromley Bromsgrove Broxbourne Broxtowe Burnley Bury Caerphilly Calderdale Cambridge Camden Cannock Chase Canterbury Caradon Cardiff Carlisle Carmarthenshire Carrick Castle Morpeth Castle Point Ceredigion Charnwood Chelmsford Cheltenham Cherwell Chester Chesterfield Chester-le-Street Chichester Chiltern Chorley Christchurch Clackmannanshire Colchester Congleton Conwy Copeland Corby Cotswold Coventry Craven Crawley Crewe and Nantwich Croydon

7 Dacorum Darlington Dartford Daventry Denbighshire Derby City Derbyshire Dales Derwentside Doncaster Dover Dudley Dumfries and Galloway Dundee City Durham Ealing Easington East Ayrshire East Cambridgeshire East Devon East Dorset East Dunbartonshire East Hampshire East Hertfordshire East Lindsey East Lothian East Northamptonshire East Renfrewshire East Riding of Yorkshire East Staffordshire Eastbourne Eastleigh Eden Edinburgh, City of Ellesmere Port and Neston Elmbridge Enfield Epping Forest Epsom and Ewell Erewash Exeter Falkirk Fareham Fenland Fife Flintshire Forest Heath Forest of Dean Fylde Gateshead Gedling Glasgow City Gloucester Gosport Gravesham Great Yarmouth Greenwich Guildford Gwynedd Hackney Halton Hambleton Hammersmith and Fulham Harborough Haringey Harlow Harrogate Harrow Hart Hartlepool Hastings Havant Havering Herefordshire, County of Hertsmere High Peak Highland Hillingdon Hinckley and Bosworth Horsham Hounslow Huntingdonshire Hyndburn Inverclyde Ipswich Isle of Anglesey Isle of Wight Islington Kennet Kensington and Chelsea Kerrier Kettering King's Lynn and West Norfolk Kingston upon Hull Kingston-upon-Thames Kirklees Knowsley Lambeth Lancaster

8 Leeds Leicester City Lewes Lewisham Lichfield Lincoln Liverpool London city Luton Macclesfield Maidstone Maldon Malvern Hills Manchester Mansfield Medway Towns Melton Mendip Merthyr Tydfil Merton Mid Bedfordshire Mid Devon Mid Suffolk Mid Sussex Middlesbrough Midlothian Milton Keynes Mole Valley Monmouthshire Moray Neath Port Talbot New Forest Newark and Sherwood Newcastle-under-Lyme Newcastle-upon-Tyne Newham Newport North Ayrshire North Cornwall North Devon North Dorset North East Derbyshire North East Lincolnshire North Hertfordshire North Kesteven North Lanarkshire North Lincolnshire North Norfolk North Shropshire North Somerset North Tyneside North Warwickshire North West Leicestershire North Wiltshire Northampton Norwich Nottingham Nuneaton and Bedworth Oadby and Wigston Oldham Oswestry Oxford Pembrokeshire Pendle Penwith Perthshire and Kinross Peterborough Plymouth Poole Portsmouth Powys Preston Purbeck Reading Redbridge Redcar and Cleveland Redditch Reigate and Banstead Renfrewshire Restormel Rhondda, Cynon, Taff Ribble Valley Richmondshire Richmond-upon-Thames Rochdale Rochford Rossendale Rother Rotherham Rugby Runnymede Rushcliffe Rushmoor Rutland Ryedale Salford Salisbury Sandwell Scarborough Scottish Borders

9 Sedgefield Sedgemoor Sefton Selby Sevenoaks Sheffield Shepway Shetland Islands Shrewsbury and Atcham Slough Solihull South Ayrshire South Bedfordshire South Buckinghamshire South Cambridgeshire South Derbyshire South Gloucestershire South Hams South Holland South Kesteven South Lakeland South Lanarkshire South Norfolk South Northamptonshire South Oxfordshire South Ribble South Shropshire South Somerset South Staffordshire South Tyneside Southampton Southend-on-Sea Southwark Spelthorne St Albans St Edmundsbury St Helens Stafford Staffordshire Moorlands Stevenage Stirling Stockport Stockton on Tees Stoke on Trent Stratford-on-Avon Stroud Suffolk Coastal Sunderland Surrey Heath Sutton Swale Swansea Swindon Tameside Tamworth Tandridge Taunton Deane Teesdale Teignbridge Telford and Wrekin Tendring Test Valley Tewkesbury Thanet Three Rivers Thurrock Tonbridge and Malling Torbay Torfaen Torridge Tower Hamlets Trafford Tunbridge Wells Tynedale Uttlesford Vale of Glamorgan Vale of White Horse Vale Royal Wakefield Walsall Waltham Forest Wandsworth Wansbeck Warrington Warwick Watford Waveney Waverley Wealden Wear Valley Wellingborough Welwyn Hatfield West Berkshire West Devon West Dorset West Dunbartonshire

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