Home > Uncategorized > Number of unemployed per vacancy, UK (WOW edition) (graph)

Number of unemployed per vacancy, UK (WOW edition) (graph)

For my view on the British labour market look here (nice long-term productivity graph), here (where I predict that the decline of productivity will end quite soon, I totally stick to this prediction), here (some historical comparative data on unemployment which show how terrible the Eurozone is doing while the UK experience is much more in line with post WW II developments and the post WW II implicit social contract.Yes, that was betrayed in the UK, too, but that does not compare to what happened in the Eurozone with regard to Spain, Italy, Ireland, Portugal and Greece Update: Krugman hits the nail on the head today, deconstructing some remarks of the increasingly extreme Weidmann, boss of the BuBa, who wants to inflict even more pain on these countries. 45% unemployment?) and here (where I indicate that UK broad unemployment is not doing as well as normal unemployment, to say the least). Mind also that government expenditure increased quite a bit, in 2014. Despite all caveats, the British labour market keeps beating my expectations. The very good thing about this is that this gives people the chance to exit crappy jobs and ´self-underemployment´. One large risk: the continued Eurozone crisis might lead to lower British exports, causing a rapidly increasing current account deficit forcing the UK into austerity and the further betrayal of the post WW II social contract. 


  1. Hepion
    November 22, 2014 at 1:50 am

    Current account balance is not influenced by “real” economic activity.

    It is dominated by answer to the question, “who will finance the imbalance”?

    People usually don’t want to hold foreign currency, and when they get it (=exporters) they use it to purchase domestic currency, and in doing so end up financing those who want foreign currency(=importers).

    That is why in the absence of capital movements, current account balance ends up at zero; exports finance imports.

    For there to be deviation there has to be reason in the capital account. Broadly defined capital account that is, not the usual narrow one.

  2. merijnknibbe
    November 22, 2014 at 8:55 am

    Dear Hepion,

    I fully agree that we have to look at the broadly defined capital account. One example: part of the persistent Turkish current account deficit ight well be financed by cash transfers from emigrated Turkish people to their families in Turkey, transfers which might not always be registrate by the authorities.

    But another point of this broad capital account is ‘trust’. When we look at the micro-scale, A german might by a Spanish Seat. This Seat is exported from Spain to Germany. This process involves multiple financial transaction between multiple parties, part of these transactions are often financed by short term loans from banks. Banks do this because they trust the situation. Somewhere in this chain, a Spanish bank might lend money to a German car trader. This happens all the time and might, when many Germans start to by a Seat, lead to conisderable lending by Spanish banks to German traders (or to a considerable amount of commercial credit provided by the Seat company to German traders). If, at the same time, the Spanish economy is not doing well, the opposite happens with German trade credits to Spain: these will dwindle. And Spain may, because of these micro transactions, become a net creditor to Germany because of macro booms and busts (in reality, of course, the opposite happened). This is trade based credit: trade comes first, credit follows. We’ve of course also had (in the construction sector) credit based trade (building, in fact). Loads of German savings (not just German savings, by the way) where channelled to Spain and Ireland to pre-finance a building boom which, among other things, increased Spanish and Irish income and attracted hundreds of thousands of migrant workers.Increased income plus rapid population growth led to an increase in consumption spending and therewith also to an increase in imports which, despite pretty nifty export growth of Spanish manufacturing, was not matched by the increase in exports and tourism income. This lasted for years and years and years and current account deficits in countries like Ireland, Spain, Greece and the Baltics went up to respectively 5% of GDP (sustainable for some time), 10%, (unsustainable) and even 15 and 25%(!?!). At a certain moment, this went wrong (as we all know). And large mistakes were made: when current account deficits are larger than, say, 8% purple lights have to start flashing (elementary macro) but that did not happen. The point – when it went wrong a kind of mild ‘sudden stop’ followed. Trust disappeared suddenly (thanks to Target2 not totally, by the way). So, you’re right and the capital account has to finance the current account deficit. But that’s a long run process and, like more long run processes, not a gradual one. Also, trade can cause lending and borrowing. But lending can also cause production and trade.. . ..

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