Jobless reality is hitting home for graduates in class of 2009

Hugo Duncan
15 Sep 2009

"We will not lose a generation of young people to work because of the global recession," promised Work and Pensions Secretary Yvette Cooper this month.

Not everyone is so sure. Shocking figures published tomorrow will show just how desperate the situation is. Youth unemployment has nearly doubled this decade, and is up 35% since December 2007.

The number of people under 25 and out of work is set to smash through one million for the first time since records began in the early 1990s as the class of 2009 swaps school, college and university for the ever-lengthening dole queue.

One can only wonder how many more have left the country to look for work or travel rather than sign up to life in bust Britain. One in five 16- to 24-year-olds eligible for work does not have a job. That amounted to 928,000 unemployed youngsters at the end of June. Of those, 161,000 have been out of work for more than a year, up from 106,000 12 months ago.

The situation among 16- and 17-year-olds is even more acute with 206,000 out of work, or 31.7%. Tens of thousands more are set to join this unfortunate club of young unemployed as 400,000 school leavers and 300,000 university graduates struggle to find work. Many will show up in tomorrow's unemployment figures, many more will be counted in the coming months.

So when Cooper and the Prime Minister promised an extra 85,000 jobs and training places for people under 25 as part of a drive to tackle youth unemployment - and save Gordon Brown's seemingly doomed premiership - celebrations among indebted graduates were muted to say the least. David Blanchflower, the former Bank of England economist and unemployment expert who spotted the recession well before anyone else on Threadneedle Street or in Government, does not share Cooper's confidence. He said: "Unemployment is climbing fast and a million jobless young people under the age of 25 are in danger of becoming a lost generation."

The unions are also concerned, particularly as whoever wins the next general election will cut public spending, something that the Prime Minister finally admitted today.

TUC general secretary Brendan Barber warned: "Public spending cuts will provoke a double-quick double-dip recession. Unemployment could well exceed four million, and it would take many years before there was any chance of returning to anything like full employment. That would scar for life a whole generation of young people."

The social consequences are likely to be stark as youngsters who fail to get into the habit of work slip into long-term unemployment and poverty.

Youth unemployment was below 700,000 when Labour came to power in 1997, and fell to little more than 500,000 in 2001. At one million, it would be running at 20% - more than double the 10% the national unemployment rate looks set to hit before the crisis is over.

The rate of youth unemployment in the UK outstrips that in the US and much of Europe including Bulgaria, the Czech Republic, Germany, the Netherlands and Portugal. It is lower than the 38.4% rate in Spain but this is scant consolation for those looking for work at a time when jobs, particularly for those without experience, are in desperately short supply.

"We know that people of all ages are being hit by the recession, but it is young people who can be most at risk," conceded the Prime Minister.

Indeed it is, but the dismal truth is that youth unemployment has been rising since 2001 and there is little sign of it falling any time soon.

It is also far higher than it was when, as shadow trade secretary in the early 1990s, Brown accused then Prime Minister John Major of creating a "lost generation" of youngsters because of a recession "made in Downing Street".

Nearly two decades later, a whole generation educated under Labour is in danger of being written off after Brown's boom turned to bust.

...and unemployment won't even peak until next year

Hopes are growing that the UK economy pulled out of recession in the current third quarter — but this does not mean unemployment will stop rising until next year at the very earliest.

Economists reckon figures tomorrow will show the jobless total rose by between 150,000 and 250,000 in the three months to July to more than 2.5 million or 8% of the workforce. Many are forecasting it will peak above three million (10%) next year or in 2011 even if the economy starts growing again. If growth does not return, four million jobless is a distinct possibility.

Unemployment does not start to fall again until strong growth returns. Businesses need to be expanding at quite a rate to hire more staff — and few can see that happening for much of this year or next. They also need access to cash, often in the form of bank lending, which remains subdued.

The one crumb of comfort is that, thanks to pay freezes and reduced working hours, unemployment has not risen even further, given the 6% slump in economic output during this recession.