S**t my economist says #9

Looking this smug is fine if you can perform miracles

A decent set of employment figures out today provided more proof that Ed Balls increasingly desperate cry that George Osborne is going “too deep and too fast” in trying to get Britain’s runaway borrowing under control is a load of rubbish.

Unemployment fell by 26,000 taking the rate down from 7.8% to 7.7%. Compare this with the 9.2% just announced in the United States, the economy the forlorn Balls used to point to as the poster boy of Keynesian spending.

Most encouragingly there were falls in the two most crucial sectors of the labour market; long term unemployment and youth unemployment, of 37,000 and 11,000 respectively.

There are some clouds in this picture. The number of people on Jobseeker’s Allowance rose and various Cassandras could be found to issue gloomy predictions about the future, a view I’m not unsympathetic to but not out of any disagreement with Osborne’s fiscal strategy.

However, these figures remain very good news. The last few years leading up to the crash saw the British government and public alike run up vast debts. Then came the credit crunch. First the private sector set about repairing its balance sheet (cutting borrowing in other words) and government stepped in as borrower and spender of last resort. Now they too are maxed out and are having to de-leverage (cutting borrowing in other words). With everyone now busy paying for what they consumed a few years ago few are spending any money on present consumption. Given that, for there to be any kind of job creation at all is little short of miraculous.

That is the situation in British political economy right now. You can choose Labour and immediate economic disaster. Or you can choose the coalition and have some pretty bad pain now but an economic recovery a few years hence. The third option, the painless escape from debt back to the go go days before the credit crunch, does not exist.

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