In the first article, Exploding The UK Employment Myth, I suggested that the current job situation wasn’t as positive as the figures suggest. So what are the implications for other parts of the economy and how can I trade this?
To consider all the economic implications would be like writing a dissertation so I’ll just focus on a few main areas.
Housing
I dealt with the main effects of unemployment in the recent piece
Are House Prices Set To Tumble? However, another major concern is the missing generation of home buyers. Under the
claimant count measure of unemployment the number of under-25s now claiming jobseekers’ benefit has almost doubled over the past year to 456,000; the labour market survey shows 18% of 16-25 year olds without a job.
That’s a lot of people in no position to even dream about buying a house and who are years off ever managing a deposit of £40,000 plus. The last housing downturn had a backstop of twenty-somethings helped by 95-100% mortgages and (for many) safer job prospects (this time around job-losses are spread over a much wider cross-section of industries, in particular the once safe haven of finance).
Last week the National Association of Estate Agents said that seven out of ten potential first-time buyers had now given up hope of owning their own home. As anyone who’s been involved in a house-buying knows, there’s usually a long chain dependent on a first-time buyer at the bottom. Without someone to buy that first house the chain could get a bit rusty.
Borrowing And Saving
Consumer spending fell by 1.3% in the first quarter of 2009, the sharpest fall since 1980. Household disposable incomes fell by 2.4% in the quarter, and the savings ration fell to 3% as households dipped heavily into their savings to pay the bills.
Yesterday the Bank of England’s Credit Conditions survey warned that the number of people defaulting on loans had risen and was likely to keep rising over the next few months. Banks reported more demand for, and increasing availability of, secured loans, but were tightening restrictions on credit card and unsecured loans.
