The US unemployment rate has risen above 10% for the first time in 27 years, leaving the US in a state of despair.

President Barack Obama will hold a jobs summit on Thursday, focused on job creation.

Although he has included business leaders amongst the 130 experts attending the summit in Washington, Republicans in Congress will opposed to any major spending plans.

President George W Bush has already frustrated them by spending billions on bailing out the banks and car makers.

The “big government” image and creating big financial defecits to be paid for by future generations are unpopular in Washington.

Economy.com’s Mark Zandi believes deficits are a major worry, but we can’t afford to be concerned about it now.

“That’s a problem not for 2009, not for 2010. That’s a problem for 2011, 2012 and beyond,” he says.

“We have to make sure that we don’t go back into a recession, because if we go back into recession, the cost to taxpayers will be even greater.”

“The deficits will be measurably larger, so I think it’s important to spend more money now.”

According to Mr Zandi, government spending needs to be aimed at assisting local government offices, as with tax funding falling, many employees are at risk of losing their jobs.

President Obama is on the look out for new ways to combat unemployment.

Unemployment benefits usually run out after six months in the US, but have been extended because of the highest unemployment rates.

Mr Zandi believes continuing with providing benefits to the unemployed as essential to maintaining demand, as those with no money make no purchases.

That situation could develop into a ‘catch-22’, downward spiral, as consumers that don’t consume, results in businesses cutting their workforce, causing more unemployed with no money to spend.

Another area where Mr Zandi feels the government can make a unique contribution is providing credit to small and medium-sized businesses.

Banks are still cautious over lending after the credit crisis, but have always given capital to start-up companies to help them expand, and these new businesses usually provide America with the majority of new employment.

Mr Zandi believes that “it’s clear that even when the economy gets back on its feet, we’re going to have very high unemployment in many parts of the country for a long time to come.

“One reason is that the people out of work don’t have the skills and education necessary to be employed in the jobs of the future.”

The US economy saw its first growth in over a year, rising to an annual rate of 3.5% between July and September.

Experts believe that a major spending plan by the US government which featured a scrappage scheme to encourage the car sales market has been the main cause of the upturn.

Some economists believe that there could be more setbacks lurking ahead, despite the official statistics showing that the recession is over.

A spokesman at the White House announced that recent economic progression was “a welcome milestone” but it would take more time for a full recovery to be recognised.

The US economy had risen 0.9% in relation to the previous three months, whereas the UK economy remained in recession, unexpectedly dropping 0.4%.

Hugh Pym, the chief economics correspondent for the BBC, revealed that the growth rate of 3.5% was greater than the 3.3% predicted by most experts.

He continued:”The sheer scale of the stimulus in the US has made a big difference, it was much bigger in percentage terms than that in the UK.”

“That the US, the powerhouse of the world economy is growing once again, is good news for the global economy has a whole.”

The last time the US economy grew was in the second quarter of 2008, by an annual rate of 2,4%.

The National Bureau of Economic Research will reveal the full extent of the US economic climb from recession when it analyses all the factors.

Some factors were significantly responsible for helping US economy during the third quarter, according to the Commerce Department.

The spending on durable manufactured products rocketed up at an annual rate of 22.3% which was the highest quarterly figure since 2001 and was spearheaded by the ‘Cash for Clunkers’ scheme helping new car sales.

Consumer spending increased on housing products by 23.4%, the greatest quarterly surge in 23 years, and came as a result of an improving housing market.

The big increase is considered by many to be due to the government’s $8,000 tax credit provided to first-time house buyers.

Government spending increased by 7.9% as stimulus spending spread and exports saw their biggest rise since 1996, rising by 21.4%.

Brian Bethune, an economist for HIS Global Insight stated that “it’s good to have the economy growing again.”

“But we don’t think that rate of growth is sustainable because it is distorted by all the government stimulus.”

“The challenge here is to get organic growth – growth that isn’t helped by fiscal steroids.”

However, unemployment is at a rate of 9.8% and a sharp fall came in September in the car sales industry as a result of the popular car scrappage scheme coming to an end in August.

Dean Baker, co-director of the Centre of Economic Policy Research believes that “you can say that the recession is over, but it sure won’t feel like that.”

“There is a lot of downward momentum that isn’t going to go.”

Lloyds Banking Group announced on Friday that it has reached an agreement to sell its estate agency arm, Halifax Estate Agencies, to LSL Property Services for just £1.

The sale of Halifax Estate Agencies (HEA) will result in the closure of approximately 121 Halifax banking counters which are situated within the estate agency chain’s branches, potentially causing 460 people to lose their jobs as a result.

With 218 branches, HEA is the fourth biggest network of estate agencies in the UK. The lack of residential property sales saw a pre-tax loss of £2m, a dramatic drop from their £34m profit in 2007.

HBOS became acquired by Lloyds during a controversial deal made earlier this year.

Lloyds released a statement on Friday, stating that the decision to sell was made as a result of considered reviews by the bank and “concluded that an estate agency operation is no longer integral to its business model”.

The decision comes after measures were made in August by Lloyds announced it was to sell its Insight asset management business to Bank of New York Mellon for £235m.

In efforts to gain approval from the European Commission for aid from the UK government, Lloyds are expected to make big cuts.

LSL currently own a range of estate agencies, such as Your Move, Reeds Rains and InterCounty. The addition of HEA would result in 584 branches and increase their estate agency portfolio to become the second-largest estate agency network in the UK.

LSL considers HEA to have been run to primarily distribute financial services products and held great potential for their business.

“This is a significant opportunity for LSL to acquire a high-quality branch network, an established asset management business and pipeline of sales on favourable commercial terms at a low point in the economic cycle.”

Shares in LSL increased by 5% to 275p and Lloyds shares increased 3.4% to 94.52p during early Friday.

The deal is expected to be completed in January 2010, and include approximately 1050 HEA staff transferring to work for LSL as a part of the agreement.

On Friday, a statement was released by LSL suggested that the acquisition of HEA had been traded ahead of management expectations made in July, with turnover for the 8 months up to 31 August, down by 18%.

LSL revealed that they await the results of 2010 with caution, confessing that “any recovery is likely to be constrained by the availability of mortgage credit and general economic backdrop.”

Official statistics show that one of the main measures of inflation has reached its lowest point since September 2004, another sign of sterling weakening. The annual rate of 1.1% in September was lowered from 1.6% in August by the Consumer Prices Index (CPI).

A separate measure of inflation conducted by the Retail Prices Index (RPI) found that mortgage interest payments and housing costs also dropped, from -1.3% to -1.4%.

The pound also reached its lowest point in the past six months when it fell 0.5% against the Euro to 1.0628 Euros and to a five-month low of 1.5730 US Dollars.

Weak

Duncan Higgins, a senior analyst for Caxton FX, felt that “this is bad news for the pound.”

“The CPI figures will weigh heavily on the UK currency and will continue to discourage investment.”

A report conducted by the Centre for Economics and Business research predicted UK interest rates would not rise above 0.5% until 2011 and fail to meet the 2% mark until 2014; a further damnation to the outlook for the pound.

Meanwhile, the strength of the UK economy was dealt a further blow last week when it was revealed that industrial output dropped in August.

A prediction for the GDP had to be recalculated by the National Institute of Economic and Social Research after the UK economy failed to grow during the June/September quarter.

However, the economy is still very “frail” according to the British Chamber of Commerce (BCC), despite business confidence improving.

In an effort to sustain a stable broader economy and prices, the Bank of England is making efforts to retain 2% CPI inflation. Should the CPI inflation drop below 1%, the governor of the Bank of England must provide a written explanation to the Chancellor, Alistair Darling.

High energy prices a year ago, in comparison to lower energy prices this September are being blamed for the recent fall in inflation. The Office for National Statistics (ONS) reported that electricity, gas, and other fuel bills tumbled by 7.3%. Energy costs have started to level more recently, with little change from August to September.

Jonathan Loynes from Capital Economics predicted that we can expect to see CPI back at the 2% mark by the start of 2010, due to increased energy prices and VAT returning to 17.5%. He does believe that a “huge amount” of unused production capabilities would keep inflation down and “keep alive the threat of a period of outright deflation late next year or beyond.”

In contrast, Keith Wade of Schroders UK forecasted that it “probably will be the low point in inflation.”

UK unemployment has risen to its highest level since 1995.

In the three months leading to June, unemployment rose to 2,435,000, making the rate of unemployment 7.8%.

Average earnings excluding bonuses also grew at their slowest rate since records began in 2001, at an annual rate of 2.5% in the three months to June, compared to 2.6% in the three months to May.

Those in manufacturing suffered worst with pay increasing only by 1.1%. Public sector work saw an average rise of 3.7%.

The full impact of the current lack of jobs has yet to be shown by the figures which don’t yet include those that left education this year.

Bank governor Mervin King warns the UK is looking at a ‘slow and protracted’ recovery in 2010.

He also hinted further measures may be needed to stimulate the economy on top of the Bank of England’s current quantitative easing.

Lost Generation

The BCC believe unemployment is likely to keep rising rapidly even if the economy begins to grow again, and may reach 3 million.

However, the Institute of Directors also estimated a million people are working part-time because of the recession, that are also not represented in figures.

Calculations based on ONS data believe unemployment among 16-24 year-olds has risen to 19.1% as 928,000 of them are classed as unemployed.

There is rising concern about the number of young unemployed people in the UK. Lord Mandelson, the UK Business Secretary said: “This is something the whole country has got to rally to. We need public and private employers, as well as those in the [charity] sector, to help us mount this national campaign to back young Britain.”

Shadow Chancellor, George Osborne adds: “Unemployment continues to rise, month after month, we are facing a lost generation of young people who can’t get work.

“The government talk about all their unemployment schemes that are supposed to help, but at the moment we’ve just got people losing their jobs and getting very little help in trying to find a new one.”

What Are You Going To Do About It?

Youth Fight for Jobs Campaign says there’s a lack of affordable housing as well as jobs for young people: “It’s about highlighting that there’s a problem, and also saying to the government, and local MPs, and councillors, what are you going to do about it?

“Young people don’t get proper training, a lot of working class young people get put off from going to university and being saddled with debt.”

The number of new claimants for job seekers allowance had been falling, but rose from 21,500 in June to 24,900 in July. The government says it will launch an investigation into the difference between those out of work and those claiming unemployment benefits.

Latest data shows, under International Labour Organisation rules, the jobless rate rose by 7.8% in the second quarter of 2009, but the rate of people claiming unemployment benefit in July was only 4.9%.

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The Department for Business, Innovation and Skills has confirmed that the government will be offering graduates struggling to find work trips abroad thanks to expedition company Raleigh International.

The scheme will pay for 500 graduates under 24 to travel to places like Costa Rica and India to take part in projects like building schools.

This comes as it is revealed that there are currently forty eight graduates chasing every job offered according to research by the Association of Graduate Recruiters.

The expeditions will be 10-weeks and will enable graduates to work on community and environmental volunteering projects in remote countries.

Unfair

David Lammy, Higher Education Minister said that volunteering would help new graduates develop the “communication and leadership skills that are so highly valued in the workplace.”

The government will pay Raleigh £500,000 to support graduates who otherwise would be unable to afford to go on such trips. According to a British newspaper, graduates must raise £1,000 to pay for flights and eligible vaccinations.

Applicants for this will have to prove an expedition overseas is beyond their financial means without the bursary. Normally, these expeditions would cost £3,000 per person.

Matthew Pickin taught in Malawi in his gap year, and says the scheme is unfair to those who had to pay £3,000, and that working to afford to be able to go abroad brought more satisfaction while being out there.

Government Not Helping Everyone

A recent graduate also disagrees with the scheme saying it’s like a “smack in the face” for those that aren’t picked.

He said: “I am out of work and I am currently funding my own re-training – currently heading for £3,000 – to make myself more employable and because the government will not help me.”

The government has increased its campaign to help graduates find work in the recession since the most recent batch of University graduates leave.

On Wednesday it announced 2,000 internships would be made available through a graduate talent pool website, and the Work and Pensions Secretary invited businesses, councils and charities to bid for a share of £1 billion to create 47,000 jobs for young people for six months at minimum wage.

‘Creative Thinking’

The outlook is also causing many graduates to stay in education.

National Union of Students president Wes Streeting said the governments “creative thinking” was welcomed to give graduates an opportunity to gain new skills.

He said: “With youth employment reaching the one million mark, funding opportunities foe skills development is surely better than the soul destroying experience of sitting at home watching Jeremy Kyle, on the dole.”

Although, chief executive of the Taxpayers Alliance, Matthew Elliot, said the scheme was a “headline grabber” that would dent taxpayers pockets.

He said: “The government needs to stop spending. It needs to focus on creating the right economic climate to allow entrepreneurs and business men to be able to hire new graduates.”

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The governments lack of action about gender stereotypes in schools has contributed to women’s pay failing to catch up with men’s according to a report by the Women and Work Commission.

The group found that the pay gap between men and women has risen from 21.9% in 2007, to 22.6% this year, as, three years after the initial report, women are still being pushed into ‘traditional jobs’.

They have asked for the problem to be tackled in careers advice in schools: “The government is committed to tackling inequalities in the workplace and progress has been made across the public sector and in helping women get the skills and training they need.

“But ministers must match commitment with fundamental change that will make a real difference – starting in our schools,” said the commission’s chair, Baroness Margaret Prosser.

Minister for women and equality, Harriet Harman said the government was “acting across the board” to tackle the gender divide.

Disappointed

She added that they will: “ban secrecy clauses in employment contracts so that women can challenge unfair pay.

“And we will encourage business to report on gender pay, but let us make no mistake: if voluntary measures do not work we will take stronger measures to ensure equal pay for women.”

It is said that good progress is being made in key areas such as childcare and flexible working, but the commission is “disappointed” with the lack of overall progress. It says that the gender pay gap still “stubbornly persists despite monumental changes in women’s position in the workplace”. More needs to be done to achieve quality flexible and part time work.

Breaking down the stereotypes needs to be done so that girls are not funnelled into what it calls the ‘five c’ careers – caring, cashiering, clerical, cleaning and catering – where pay tends to be lowest.

Baroness Prosser said: “We need to make our schools the nurturing ground for ambition so that everyone has the opportunity to use their talents to the full.”

Urgent Changes Needed

43 recommendations were put forward, including: work experience placements for girls in occupations where traditionally women are not well represented; buddy programmes to team girls together on placements in non-traditional sectors to increase confidence; and careers advisers training in challenging gender and socio-economic stereotyping for every school.

Anna Mann, senior partner of headhunters MWM Consulting and leader of the Women on Board initiative said: “Most companies are crying out for qualified female candidates, but the fact is that there are still too few women with the experience to take on these roles.

“What women need is support to develop the experience and networks they will need to step into senior roles later down the line.”

TUC’s general secretary Brendan Barber described the report as a “stern wake-up call” to anyone who thought the pay gap was near an end.

Representative of Strategy at the Equality and Human Rights Commission, said the report highlighted that “urgent changes” need to be made.

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‘Masked Tragedies’

Nearly a million people in the UK have been forced into part time jobs because they can’t find full time work during the recession, official figures from the Office for National Statistics show.

According to the statistics, in the three months until May this year, around 927,000 people have had to take on part time positions because they couldn’t find full time ones. This is a third more than a year ago and the highest number since the ONS began its collecting data in 1992.

According to the TUC, these people are the “masked tragedies of the recession” because they aren’t turning up on unemployment records.

 TUCs general secretary Brendan Barber said: “These people won’t be showing up in the spiralling unemployment figures but the economic slowdown and their subsequent move into part time work will have forced many of these families to rein in their spending dramatically.”

“While it’s better for these million people to be in a job than have no job at all, many will have downshifted and will be doing the same jobs that they once did full time, but for a fraction of the pay.”

Reduced Working Hours Unwanted

As the recession continues to effect the economy, many companies have asked their staff to take reduced working hours. This includes bigger companies like British Airways who have asked many of their employees to take part time work or unpaid leave.

According to the ONS, 12.5% of part time workers do not want to work fewer hours. This is compared to only 8% saying the same thing earlier this decade. This figure is nearly as high as the last recession in the early 1990s when the rate reached 14%

This comes after news last week that unemployment rose by record amounts in the three months leading up to May, to reach 2.38 million.

The number of unemployed also increased by 7.6%, which is the highest in over a decade.

Those claiming unemployment benefit also increased by nearly 24,000 last month to reach 1.56 million. This is actually slightly lower than was initially predicted by analysts.

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Unemployment levels rose by 281,000 to 2.38million in the three months to May according to the Office for National Statistics (ONS). This is an increase of 7.6%, the highest for over 10years.

The number of people claiming unemployment benefit rose by nearly 24thousand in June, reaching 1.56million. This, overall, is still less that was predicted by analysts.

Young people have been particularly hit as companies cut back on intake in order to reduce costs. Unemployment in the under24s is at a 16year high of 726thousand.

The number of people that have been looking for work for over a year also increased to 528,000-an 11year high.

The general secretary of TUC said: “It’s particularly worrying that over half a million unemployed people have been out of work for at last a year, including 133,000young unemployed people.

Crisis Not Over

“With a new generation of school and college leavers soon starting to look for work, our unemployment crisis will get even bigger.”

An independent survey says that two-thirds of people across Britain know at least one person that has lost their job due to the recession.

According to another study, two-fifths of people also worry about losing their job in the recession.

The economy may be stabilising, but economists still expect unemployment to continue to increase.

Capital Economics’ Vicky Redwood explained how the figures show there to be “conflicting signals about whether conditions in the labour market are getting better or worse.”

Rise In Earnings?

The new total of unemployed in the three months leading up to May is the biggest quarterly rise since records began in 1971.

On the other hand, the rise in claimants for unemployment benefit is less than the expected 39,000.

Vicky Redwood said: “The claimant count measure of unemployment in June posted its smallest rise in a year. However, the wider ILO measure posted its biggest rise on record.”

The government are using the ILO figure of 2.38million unemployed because it apparently takes into mind a more comprehensive indicator of the job market.

Unemployment may be at a high, but so are earnings including bonuses. They rose by 2.3% in the quarter leading to May which is the highest since December.

3.1Million Peak Next Year

But it seems that bonuses are making all the difference. When excluded, average earnings only increased by 2.6% which is the lowest rate since the data began to be collected in 2001.

The chief economist for the British Chambers of Commerce said that the figured were “grim reading.”

He said: “On the basis of these numbers, we reaffirm our forecast that unemployment will peak at around 3.1million next year.”

Unfortunately, as unemployment rises, the number of job vacancies falls. In the three months leading to June, vacancies were down 30,000compared to just the previous quarter.

There is also a gender difference. The number of unemployed men rose by nearly 200,000to reach 1.46 million, compared to a rise of 84,000unemployed women, which makes a total of 107,000.

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High Figures Bring Bad News
 
Office for National Statistics figures show that unemployment rose to 2.261 million in the three months to April, the highest since November 1996.

The jobless rate also rose to 7.2%, the highest it has been since July 1997. While the number claiming unemployment benefit rose by 39,000 in May, which was much less than the original estimation of 60,000.

Young people are among the worst hit, with the unemployment rate of 18-24 year olds currently standing at 16.6%. And the claimant count rate rose to 4.8%, its highest since 1997.

Average earnings did however rise by 0.8% which was higher than expected, but this reflects the time of bonuses.

Young People Suffer Most

There were 271,000 people less in work over this three month period, the biggest quarterly drop since 1971 when the records began. And the number of job vacancies also fell by 35.6% compared from May last year to May 2009.

Young people are particularly suffering in the recession. In the first three months of the year 462,000 young people between 16-17 were employed, 16.5% less than in the same quarter of 2008.

Also in the same three months, 3.5 million aged 18-24 were employed, 4.8% less than the same time in 2008. Along with the unemployment range in the younger age group being 16.6%, the highest since 1993.

The General Secretary of the TUC, Brendan Barber said: “Youth unemployment is now at its highest for 15 years. And it will get worse when millions of fresh school leavers graduate and start looking for work in the coming weeks.”

Still Hope

The only age group that have increased in employment numbers are those of retirement age, with a rise of 2.6%. Analysts believe this means that the recession could be coming to an end but also say that it is too early to come to a firm conclusion.

The Chief Economist for the British Chambers of Commerce said: “These jobless figures are slightly better than feared, but the overall situation remains grim… It is much too early to talk about the end of recession and it is important not to withdraw the policy stimulus before there is firmer evidence that the economy has stabilised.”

On a less positive note, Alan Clark, an economist for BNP Paribas added: “The economy may actually start to expand, but it won’t be very fast… and until the economy is growing in line with its long-term average we will continue to lose jobs and we will continue to see downward pressure on wages.”

“It’s better than expected. It is probably still too soon to conclude that we have reached any turning point, but it is moderately encouraging,” added Ross Walker, UK economist at RBS Financial Markets.

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