June 14, 2002

High-Unemployment Britain Is Gone

Ever since the late 1970s--ever since Margaret Thatcher's Conservatives won their first election--Great Britain has, in my mind, been a country of high unemployment, few jobs, lots of structural labor market problems, and social decline.

All that now seems to be over. Britain's structural labor market problems now are no worse than those of the United States.

Financial Times

UK unemployment drops to 26-year low

By David Turner | Published: June 14 2002 10:32 | Last Updated: June 14 2002 10:32

The number of people in the UK who are unemployed and claiming benefit fell back to its lowest level in a generation, signalling the robust health of the economy. Figures released on Friday highlight the underlying confidence in the UK economy felt by many businesses. These companies responded to the recent short and shallow downturn by hoarding labour in the expectation of an imminent return to strong demand. Unemployment has also been kept low by strong hiring from the public sector, as the government funnels money into services to realise its ambitious plans for health, education and transport.

But the figures also suggest that the labour market remains tight. Tight labour markets tend to encourage higher wage demands and lead to greater inflationary pressure. The low level of unemployment could also provide another reason for the Bank of England to start raising interest rates. Over the past few months earnings growth has failed to go beyond the 4.5 per cent barrier which the Bank's monetary policy committee views as consistent with stable inflation.

The unemployment claimant count fell by 7,000 to 944,600 in May according to the Office for National Statistics - the lowest number in just%uFFCAover 26 years. Unemployment claimants accounted for only 3.1 per cent of the workforce. By the broader measure, which includes everyone seeking work but unable to find it, unemployment rose to 1.554m in the three months to April - a rise of 19,000 on the previous three months. But even by this measure, the unemployment rate was up only 0.2 percentage points on the year before at 5.2 per cent, despite the global economic downturn.

Average earnings in the three months to April were up by 3.3 per cent on a year before - the strongest rise since December. Earnings growth dipped sharply at the turn of the year, depressed by low annual bonuses. The latest earnings figures suggest that underlying earnings growth remains strong but not yet at levels which will immediately worry the Bank of England.

However, unemployment is expected to fall and earnings growth is expected to rise in the coming months as the UK economic recovery continues.

Posted by DeLong at June 14, 2002 06:45 AM


Very careful wording to start this post, almost "lawyerly" wording. Let's see:

"Ever since the late 1970s--ever since Margaret Thatcher's Conservatives won their first election..."

So, no fair hiding: Was Maggie's election a response to the problems you mention (e.g., out of control unions, my phrase not yours), and did she help put them on the road to recovery? Or, if not, from whence the good times?


Tom Maguire

Posted by: Tom Maguire on June 14, 2002 11:52 AM

I'm genuinely unsure. One of my projects this summer is to mark my beliefs about Britain over the past two generations to market...

Brad DeLong

Posted by: Brad DeLong on June 14, 2002 12:16 PM

>Very careful wording to start this post,

>almost "lawyerly" wording. Let's see:

Why is everyone around here picking on us lawyers lately? I should start a class action suit against this site.

>"Ever since the late 1970s--ever since Margaret

>Thatcher's Conservatives won their first

>election -- Great Britain has, in my mind, been

>a country of ... social decline..."

I had the pleasure of being over there in the mid-70s and watching a Labour Party conference, starring the Militant Tendency, on the telly.

They were lunatic -- I've never seen anything close to it even in local NYC Greenwich Village politics -- and they were a ruling national party.

One may have only noticed the the problems over there upon the arrival of Mrs. Thatcher, but they certainly pre-dated her and she was a reaction to them.

She once made a comment along the lines of "We have a two-party system so inevitably Labour will be elected again some day. Our job is to stay in power until they regain their sanity".

She accomplished that.

Posted by: Jim Glass on June 14, 2002 12:42 PM

Say, rather, that Militant Tendency bore the same relationship to the 1970s Labour Party that the Texas Republican cadres who applaud calls for an all-born-again-Christian judiciary bear to the 2000s Republican Party...


Brad DeLong

Posted by: Brad DeLong on June 14, 2002 12:45 PM

With his posts the Professor has suggested a very interesting quiz, sort of a political Rorschach test. It takes a special kind of Democrat to take this test, however, but I expect that this site attracts a very special kind of Democrat. So, if I may:

I have been at innumerable cocktail parties where people marvel that I might be a Republican. Surely, they say, you can not be comfortable with the Christian Right and the gun advocates? OK, then, if, I say, IF that is the extent of your objection to the Republican Party (and I said, a SPECIAL kind of Democrat, so if you want to extend the list of objectionable Republican policies, I have not asked this question clearly), then tell me (tell the world): how do you feel about Maggie?

Very clever, Prof. An interesting way to help folks crystalize their objections to the Republicans. Hmmm, there should be similarly iconic figures on the Left. More experiments to come? You are a sly one. But keep an eye on that lawyer.


Posted by: Tom Maguire on June 14, 2002 01:27 PM

I too experienced the bizarre politics of mid-70s Britain, first hand. March of 1974, on my first visit to London, the lights of Picadilly Circus were all off. Retail stores operating by candlelight, because electricity was rationed due to coal miner strikes. Transit strikes, too. The trade unions were in near total control of the country.

Ted Heath called an election shortly after I arrived, and ran in a near dead heat with Labour. So the Liberal party (with the balance of power) collaborated with Wilson to run the country even further into the dust.

I vividly remember being panhandled by an exceptionally polite, well dressed (complete with school tie, bowler hat, and umbrella)gentleman one evening when I was strolling the streets of Bloomsbury: "I say, could I trouble you for a spot of change?"

Enter Maggie a few years later, and if it wasn't the end of the troubles...not even maybe the beginning of the end...but.... By the time of my next visit in 1980 I hardly recognized the place for its vibrancy.

Posted by: Patrick R. Sullivan on June 14, 2002 01:36 PM

Patrick Sullivan talks about lack of power in Britain in 1974. We had this recently in California---due to an ideologically obsessed federal government, greedy companies, and a political process in Sacramento that was (and remains) corrupt.

I guess all we can hope is that, in the same way as Thatcher, a cleaning rain will come along to purge our current system.

Posted by: Maynard Handley on June 15, 2002 11:02 AM

Many people in England were miserable under the rule of the Iron Lady. Certainly her addiction to monetarism and her promises that inflation could be controlled without higher unemployment--these were bad policy moves, and bad political promises to have made before her election.

Adam Smith

Posted by: Adam Smith on June 15, 2002 04:27 PM

hi guys, im in the middle of a punk rock assignment at the moment and need to write about the strikes in the 70s as part of it...i dont have a clue about what strikes were where and why- so any ideas at all- i would be SO grateful!!!!!!
ps im kind of desperate! x

Posted by: stef on October 2, 2003 01:42 PM
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