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Well, it is nice to finally see some good news emerging on the UK job front, although for many people this is hardly having an impact on their prospects.  Luckily for the moment, business are looking more positive.  The BBC news site reported that the “service sector in the UK grew at its fastest monthly pace in three years in February, providing further evidence of the economy’s recovery”.   Also, the Chartered Institute of Purchasing and Supply (CIPS) index rose to 58.4 from 54.5 the previous month, its highest since January 2007, allaying fears among some that the UK could slip back into recession in the current quarter.

But as always, we are not out of the woods yet. While the Chancellor has some room to play around with much less borrowing than expected in January and February 2010, the huge austerity measures planned for the public sector will begin to kick in this year and next year, in terms of taxation and cuts in expenditure.  This will create a rise in unemployment yet again and may well depress the economy along with the gradual reduction in stimulus measures such as the car scrappage scheme.  Maybe as we move into Spring, the rise in temperatures  and some sunshine will lift the national mood  and encourage further optimism.  Who would have thought that the UK weather would be the bright spot!

As for your CV, what does all this mean?  It means you need to have a good CV ready for any opportunity.  But that is not enough.  Try to find people you know, use whatever networks you can, such as LinkedIn or Facebook. Always ask if someone knows someone  who might need a good employee.  Then have a powerful CV ready to seize it.

As mentioned in the previous blog entry, the recovery is likely to be very slow.  While the stock markets perform somersaults on the back of the massively cheap liquidity (Quantitative Easing) from central banks and future taxpayer-funded stimulus packages paid for by huge government debt, those people in the real economy who are desperate to find work are not feeling terribly happy.  Even those in employment may still be subjected to the 20%-30% pay reductions from employer moves to 4-day weeks or long periods of time off witnessed in the car manufacturing sector.

Sadly, as the public sector moves into redundancy mode after the election, with as many as 300,000 jobs under threat, as well as countless public sector contracts, the risks are not yet gone and the human misery will endure.  This will no doubt have a disproportionate impact on specific regions of the UK which depend more on government expenditure, with the North and West of England suffering more than London and the South East.

So from where can we look for salvation in 2010?

From Europe: Well, we could look to Europe as it emerges from recession, but Europe’s sclerotic economy has underperformed most of the developing world and the United States.  And with Nicolas Sarkozy causing fury in London as he looks forward to strangling London’s financial services sector with his newly installed French Internal Market Commissioner, I think Europe is once again going to turn inward and become more protectionist against the evil forces of global capitalism. This does not make for a strong Europe.

The US: The US could be looked upon as a possible salvation, after all markets have rejoiced at the minor decline in unemployment – just 11,000 versus an expected 110,000. Sure, it may herald an improvement in the US economy.  But declining rates of unemployment do not a strong recovery make.  Fast and rising levels of employment, combined with growth in incomes and stable savings rates can offer the consumer (and even investment) led rise in consumption the world sorely needs to come out. In reality, the US is not the best prospect for the world economy, saddled as it is with debt.

US Job Losses to Nov 2009

The BRIC countries (Brazil, Russia, India, China): Well, Brazil is performing well in this financial crisis but it is not an economic powerhouse and has its own problems of an asset bubble as global investors borrow cheaply and plough money into the Brazilian market that is fuelling a surge in imports.  As such, interest rates look set to rise to 10% there.  Meanwhile, Russia has suffered during the crisis and is only gaining ground with the rise in oil prices from their previous lows.

Asia: It is Asia that must come to our salvation.  Indeed, even the members of APEC- Asia-Pacific Economic Cooperation – concede that this time around the burden must fall on them:  Singapore’s Prime Minister Lee Hsien Loonghas  said that, with weaker US growth, “somebody else has to spend more somewhere else in the world…[and t]his has to be in Asia.” – Nov 2009.  Indeed, APEC represents 21 of the world’s largest economies accounting for 44% of world trade and 40% of the world’s population.  The International Monetary Fund said last month that Asia would grow by 2.75% in 2009 and 5.75% in 2010, compared with flat to negative growth in the US and Western Europe, boosted by stimulus packages led by China – which has invested $586 billion in measures to grow their economy and build infrastructure.

That doesn’t mean you should rush to Asia for jobs.  The jobless rate across Asia has risen steeply during this crisis as western demand for manufactured goods collapsed.  But it does mean we should cheer the Asian economies on and support the US in its ongoing, though sometimes fruitless, efforts to persuade China to allow the Yuan to appreciate so that our industries can begin exporting to a truly enormous market.

The moral of the story – the fate of our economy largely rests in the hands of others much farther from our shores.

The “Lace Plant” Economy?

The job market in the UK is fragile, with Thresher’s announcing the potential for 3,000 jobs to go as it moves into administration.  Moreover, a report for Centre for Cities predicts a rise in public sector job losses, reaching 290,000 by 2014.  This process is already underway with job losses announced in the Land Registry and evidence that fixed term contracts are not being renewed.  Finally, growth remained negative this last quarter, which is forcing the BoE to consider increasing Quantitative Easing by £50-75Bn to pump yet more money into the Economy – if the Banks actually pass this on to the private sector economy that is.

However, other news suggests that the job market is picking up.  Banking and financial services recruitment has been accelerating.  Several recruitment companies have been swamped with demand as banks finally invest in new talent amid super-profits in their investment banking arms.  No doubt such a boom is helped by the growth seen across the world, particularly in the US where there was over 3% growth in GDP.  Even retailers are now buoyant about economic prospects as fearful consumers gain confidence in their own job security with slower rises in unemployment.  Perhaps this year people will really try to celebrate Xmas.  Although if they do, they seem set to celebrate in the UK as airlines continue to struggle with falling demand and high oil prices.

Economic Growth Prospects: The Madagascan Lace Plant

Overall, what does the future bring?  Cautious optimism is the view of this blog.  There are green shoots, but  sadly they belong to the  Madagascan lace plant – one of the slowest growing plants on the planet and one which is notoriously difficult to cultivate. As such, there will continue to be job losses and the graduate population will continue to feel pain for a while yet.  But we might be seeing some hope.   Let’s hope the economists running the economy are sophisticated horticulturists!

The Return to Growth

We hear talk that the UK economy is recovering.   We continue to see the FTSE shoot past 5000 (see chart 1 below), as traders pile into the bull market in search of the easy profits so greatly missed since August 2007.  Certainly bankers are set to receive bumper bonuses, higher than any previous year as far as Goldman Sachs is concerned, showing that confidence is returning to the City. Yet again, the City is proving that almost anyone can make a big profit when indexes only go up and go up steeply like this.  But the market is just a sea of expectations and assumptions – and so markets can come crashing back down to earth when “main street” realities prick the bubble of Wall Street financial models.

FTSE 100 Index: Bank super profits are easy when indexes rise so fast

But this happy picture of improvement is not restricted to the investment banks. Surprise data from the UK Office of National Statistics shows a drop in youth unemployment over the last quarter: young jobless numbers fell from the record high of 947,000 to 946,000, rather than breach 1 million as forecast by economists.  Google, considered the weather vane of the internet economy, has seen rising quarterly profits ahead of analysts’ expectations (14/10/2009). And John Lewis, the same barometer on the high street, has also seen rising sales.

On the other hand, Economists urge caution that we are not out of the woods yet. Certainly as far as employment is concerned we are in a precarious position.  The chart below shows the trend in jobless totals in past recessions in the USA, and it seems we are not far from the bottom when looking 24 months out from Dec 2007. But this recession is different to others.

The chart shows the progress of job losses in the USA in past recessions

The shock to bank balance sheets has been extreme and many European banks are still sitting quietly on toxic assets that they have yet to write down, holding them for the long term in the hope they will recover their value. While these assets exist, banks will need to restrict their lending and build up their capital base such that lending to businesses – the engine of our future recovery – is constrained.  Banks also continue to deal with rising corporate and residential defaults that reinforce their risk averse proclivities.  As repossessions continue, mortgage payment protections run out and central government prepares to end its support in the face of huge deficits, more painful job losses and cancellations of large projects will ripple through the economy.

So, do you brush off your CV? Well, yes of course. One must not stand still. But don’t think that the market is easy or think something is wrong with you if you cant find work quickly. We have more ups and downs in this recession and you need to be savvy, positive, creative and realistic. The opportunities are there – but you need to find them and be well-prepared to get them.

A survey done in mid-2009 with 2,100 UK employers by the recruitment expert Manpower discovered that 80% of employers expected no change in staff numbers for the next three months, while 9% expected to actively increase staff. This boosted the UK’s net employment forecast up to -2 for the fourth quarter of 2009, being at -6 in the third quarter. The numbers gauge the balance of employers’ intention to acquiring to releasing staff.

Employers are reportedly turning to more experienced candidates, reinforcing evidence that the young are suffering greatly during this recession.