UK Unemployment Time Bomb to Explode July 2009

By: Nadeem_Walayat

Official UK unemployment data for November 08 stands at 1.97million, with unemployment as of the end of January estimated at 2.1 million as a consequences of the rise in claimant count for December 08 and January 09 of 226,000. However whilst the pace of unemployment increases is bad as it is, which is approaching 100,000 a month, unfortunately there also exists the unemployment time bomb of the estimated 600,000 graduates that are expected to join the labour market in July 2009, which could result in a surge of unemployment of as many as 250,000 in a single, with also extra high unemployed numbers for subsequent months.

As soon as the implications of this surge in unemployment dawns on the financial markets, probably some time in advance of the release of data for July, there could be a panic in the markets as stocks, bonds and sterling are dumped in the face of what is perceived as economic meltdown as the number unemployed takes a quantum leap towards busting through 3 million.

UK Recession Forecast 2009-10 - Conclusion

The following is the conclusion from the indepth analysis / forecast for the UK economy for the period 2009 to 2010:

In the final analysis, the projected course of the recession over the next 2 years is as illustrated by the below graph in that the severe recession is expected to bottom at an annualised rate of -4.75% GDP in the fourth quarter of 2009 (small quarterly gain on the 3rd quarter), which will be followed by a recovery as the rate of annualised GDP contraction improves as government stimulus measures announced to date and deep interest rate cuts as well as future stimulus during 2009 kick into gear. The UK economic recovery is expected to continue into the fourth quarter of 2010 i.e. after the general election. The total recession from peak to trough is expected to see GDP contract by 6.3% and therefore this will be the worst recession since the 1930's Great Depression.

Unfortunately for the Labour government the economic cycle is completely out of sync with the election cycle as the economy is not expected to emerge from this severe recession until AFTER the next election as 2010 1st quarter GDP is estimated to be at an annual rate of contraction of -3.9% (despite a quarterly gain), this therefore increases the probability of Labour losing the next election as the state of the economy is nearly always the primary determining factor for the electorate. However the Labour government will do its up most to battle against the recession especially once GDP data shows contraction of more than 4% on annual basis, therefore the expectations are strong that the Labour government will sacrifice long-term growth for the short-term possibility of turning the economy around before the 2010 election. This also suggests that the 2010 recovery may not be able to take hold and therefore sets the scene for economic weakness during 2011-2012, perhaps suggesting a double dip recession.

By Nadeem Walayat
http://www.marketoracle.co.uk

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Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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