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Economy showing green shoots for UK Jobs

It has affected millions of Britons and billions of households across the world. Mounting debt, spiralling jobs losses and rising food prices have taken its toll as Britain weathers the worst economic storm since the Second World War. Now, ten months into the recession, economists are feeling increasingly positive that the first green shoots of an economy on the mend are finally showing and promising good news for UK jobs.
But despite the flickering lights at the end of the tunnel, Britain still has a rather bumpy ride ahead. In the April 22 budget speech1 Alistair Darling forecast a decline of 3.5% in Gross Domestic Produce (GDP) for 2009 with an expected growth of 1.25% for 2010 and 3.5% for 2011. At a recent news conference in Brussels2, however, the EU Commissioner for the Economy, Joaquín Almunia, painted a somewhat bleaker picture when he said EU economies can expect a decline of 4% in GDP in 2009 with the shrinking levelling out towards the third quarter of 2010. Positive growth would only be seen in 2011. The National Institute of Economic and Social Research (NIESR)3 recently echoed Almunia’s view, saying UK unemployment will only start its recovery once it has hit 3.1 million in 2011.
Despite the huge amount of job losses and inflation rippling through the United Kingdom, other developed countries are being hit much harder. In Germany the economy, battered by a loss in motoring jobs, is shrinking by 5.6% and in Ireland it is expected to be especially severe at a contraction of 8%. The International Monetary Fund4 has also revised its original forecast of 0.5% growth in Japan for 2009, instead turning it into a 6.2% plunge.
Back on home turf it appears that despite culling many banking and finance jobs in London, the city is not the worst hit by the economic downturn. According to a recent analysis by The Work Foundation independent consultancy5, the “areas that have experienced the biggest jumps in the numbers claiming benefits are the ‘core cities’ of the North, the West Midlands and Scotland,” all areas traditionally associated with manufacturing jobs and heavy industry.
Birmingham, at the heart of Britain’s car manufacturing industry, has been worst affected with a total of 7.3% of the workforce claiming benefits in February 2009, up from 5.3% in February 2008. According to the study, Leeds showed the next biggest increase with a total 4.3% of claimants, followed by Glasgow, Sheffield, Kingston upon Hull and Manchester. In a bid to rescue as many jobs as possible and create new ones, the chancellor recently cast a £1.7 billion jobs lifeline to support existing JobCentre Plus centres along with the www.jobcentreplus.gov.uk job site, and protect 500 000 jobs through the New Deal.
And the recession doesn’t stick to the workplace either. John Farrelly, director of counselling at the Catholic church’s marriage-care service, Accord, is quoted in the Irish Independent6 as saying: “The recession is quickly and deeply affecting marriage and family,” with a 40% increase in the number of couples seeking counselling as a result of mounting financial pressures and unemployment woes.
For many, however, the recession has been the catalyst to spur them to do what they always wanted, be it striking out on their own, following careers in creative industries, or leaving the city behind for a leisurely life in the country. Quoted on bytestart.co.uk Stuart Watson, partner at Ernst & Young said that the current environment is creating many new opportunities for entrepreneurs.
But how did we even get ourselves in this mess in the first place? It all started in the United States when banks bundled risky mortgages and sold them off to other banks across the world as solid investments. Then interest rates went up and the US housing market cooled.
Investors woke up to the risks involved, banks started tightening controls and stopped lending to each other, restricting the flow of cash and credit around the world. The crunch for credit started: Revenues plummeted, businesses and high street shops closed their doors, and thousands of workers across the UK lost their jobs. Now, in the second quarter of 2009, the bad news continues. Last week iconic American car manufacturer Chrysler declared bankruptcy and General Motors may follow suit. In the meantime the outbreak of swine flu continues to cause panic around the world.
It is somewhat surprising then that the stock market is up by 32% on total value traded during February, the highest total for a single month since October last year and continuing its three-month recovery run which suggests the worst of the recession may be over. In a Sunday Times interview Ed Friedman, director at Moody’s Economy.com, said because of the optimism in markets, investors were able to absorb information that would have once given them the jitters, like the demise of Chrysler and the outbreak of swine flu. He added investors seemed to have decided that if the markets were “not at the bottom then they were at least close”.
Consumers seem to agree with Mr. Friedman with consumer confidence at a higher level than anytime since August 2007 when the credit crunch first hit the UK. Although still in the negative, the index rose 12 points from its all-time low in July 2008. The rally is “largely driven by the public’s perception that the next twelve months will be better for both our own personal finances and particularly for the economy in general,” commented Rachael Joy in the Consumer Confidence team at GfK NOP.
But many analysts cause against an overly optimistic approach. “The economy is no longer in freefall,” said Almunia, but the recovery is still fragile. For now there remains a big gap between the optimists and naysayers: On the one side the idealists believe we have seen the worst and are set for slow but steady improvement; on the other the cynics believe the problem is something more fundamental that can’t be resolved through quick fixes. Only time will tell who is right.