Labour fear of ‘jobless recovery’

Labour is to warn about the dangers of a “jobless recovery”, a day after figures suggested UK growth next year may not be as strong as first thought.

Shadow Work and Pensions Secretary Douglas Alexander will say ministers are “complacent” about employment returning to pre-recession levels.

Job vacancies are lower than they were at the start of 2010, he will argue.

Chancellor George Osborne has said the economic recovery is “on track” despite challenging global conditions.

The independent Office for Budget Responsibility’ s (OBR) upgraded its 2010 growth forecast on Monday but lowered those for 2011 and 2012.

While it cut its forecast for public sector job losses over the next four years from 490,000 to 330,000, it said it expected total unemployment to rise to a peak of just over 8% in 2011 – in line with previous forecasts – before falling to just over 6% by 2015.

Labour has maintained this year’s upturn in growth has been the result of its measures to protect jobs during the recession – an argument rejected by ministers.

The opposition has said coalition spending cuts could result in a “jobs gap”, given that many private sector firms are operating at peak capacity already in terms of employment.

“I think there is a real risk that the real and present danger in the jobs market goes unnoticed,” Mr Alexander will say in a speech to the think tank Demos.

“I am worried the government is too complacent about the risk of a slower and more painful return than many yet realise to the levels of employment and unemployment we have become used to.”

Laying off public sector workers in parts of the country where they are few vacancies, and where people will need time to learn new skills, is likely to prove counter-productive, he will add.

“We don’t just need to avoid a jobless recovery across the country. We need to prevent one in any community.

“Otherwise, the risk is that we do not see jobs emerging in those areas and a hugely expensive and socially damaging trend of rising long-term unemployment cannot be reversed because there are so few vacancies on certain areas.”

The OBR suggests the recovery will be slower than those after the recessions of the 1970s, 1980s and 1990s due to abnormal lending conditions, private sector indebtedness and fiscal consolidation.

But after it revised its growth forecast for 2010 from 1.2% to 1.8% – while lowering its estimate for 2011 from 2.3% to 2.1% and that for 2012 from 2.8% to 2.6% – Mr Osborne said fears of a double dip recession had been dispelled and the UK was on a path to more “sustainable growth”.

“The message from the Office for Budget Responsibility is that Britain’s economic recovery is on track. The economy is growing, more jobs are being created and the deficit is falling,” he told MPs.

The coalition is pursuing far-reaching reform of the welfare system in an effort to boost work incentives and has pledged £1.3bn in funding for areas with historically high levels of public sector employment to help diversify their economies.

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