UK unemployment rate ticks up, underlines steady stance on rates

Britain's unemployment rate unexpectedly edged up in the three months to December to mark a first rise in almost a year, underlining a message from the Bank of England that it is in no rush to hike borrowing costs.
The jobless rate edged up to 7.2 percent in the three months to December compared with 7.1 percent in November, the Office for National Statistics said on Wednesday.

That was the first rise since the three months to February 2013 and was higher than the unchanged reading forecast by economists in a Reuters poll.

But the number of claimants of jobless benefits - a narrower category than those who are deemed unemployed - fell for the 15th consecutive month, while wage growth accelerated.

That suggested a mixed picture for the labour market, adding weight to last week's shift of emphasis by the central bank to a broader range of measures of slack in the economy when considering changes to monetary policy.

The BoE was forced last Wednesday to overhaul its previous forward guidance policy that hinged on a 7.0 percent unemployment rate threshold, a level almost reached in the three months to November.

It also said it was in no rush to hike rates.

The minutes from the BoE's last meeting, also released this Wednesday, showed policymakers had no disagreements about major changes to the central bank's forward guidance policy.

"(With) weaker inflation below target, the unemployment rate tantalisingly moving away from their threshold, it helps to take the pressure off the BoE for early rate increases," said Brian Hilliard, economist at Societe Generale.

Sterling fell to a session low against the dollar and the euro while gilt futures extended gains after the data.

The ONS said the number of people claiming jobless benefits fell by 27,600 in January, compared with a forecast for a decline of 20,000 in a Reuters poll.

Wage growth has lagged inflation over the last years, and the squeeze on incomes is a key battleground of next year's general election.

Average weekly earnings rose by 1.1 percent in the three months to December 2013 compared with the same period in 2012 - its highest since July last year, although still below the inflation rate.

Excluding bonuses, average weekly earnings rose by 1.0 percent by the same comparison.

The annual inflation rate was 1.9 percent in January - below the BoE's target for the first time in over four years.

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Bank of England governor: interest rate rise not on the agenda

Mark Carney vows to keep cost of borrowing at record low 0.5% despite policy linking a rate rise to a sharp fall in unemployment

An early increase in borrowing costs was ruled out by the governor of theBank of England as he insisted that this week's faster than expected fall in unemployment will not lead to an automatic interest rate rise that might choke off the recovery.

All but burying his "forward guidance" policy of linking an interest rate rise to a fall in the rate of unemployment to 7%, Mark Carney vowed to keep borrowing costs at their record low of 0.5% for the time being. He was speaking a day after it emerged that the unemployment rate fell to 7.1%.

Interviewed on BBC's Newsnight, Carney rejected the idea that plunging unemployment was a headache for the Bank. "If our forecast is going to be wrong it's better to be wrong in that direction," he said.

Carney also said that when the Bank decided to raise interest rates for the first time since the onset of the financial crisis in 2007, the moves would be gradual.

Economists have warned that a rise to around 3% in the interest rate would lead to huge increases in mortgage costs and a wave of repossessions, as well as damage business.

Downing Street and the Treasury have been looking nervously at the politically unpredictable consequences of repeated small interest rate rises before the general election in May 2015.

Although the Treasury maintains that an interest rate rise would help savers and be a sign of an economy returning to normality, No 10 is more ambivalent.

Downing Street feels assured that Carney is a practical Bank governor driven by the state of the real economy, unlike his more academic predecessor Mervyn King.

The governor said the Bank's monetary policy committee would be looking at all aspects of the labour market and not just the unemployment rate. The MPC had used the 7% figure to enshrine the idea that joblessness would have to fall considerably before he would "even begin to think about" raising borrowing costs.

Some City analysts are expecting Carney to announce in the next few months that he will lower the threshold at which the Bank would consider raising interest rates to an unemployment level of 6.5%.

The governor said that would be decided by the MPC but added that it was "really about overall conditions in the whole labour market", where productivity remains poor and many people working part-time still want full-time jobs.

Carney said the economy was "coming off a low base" and output was still below the levels when the economy dropped into its deepest recession since the second world war.

"The worst of the crisis is behind us but the financial system is not functioning as well as it could," he said. "Uncertainty among households and businesses is still preventing investment."

No 10 remains convinced that a year of growth, so long as it does not tip into over-heating, will ensure Labour's stubborn opinion poll lead is worn down into 2015.

Although David Cameron urged voters to be patient on living standards, his aides believe average incomes, once tax changes are taken into account, are already starting to rise above prices.

In a speech to business people in Davos, Switzerland, the prime minister will try to present his most optimistic long-term vision of the UK economy for many years , saying Britain can become "the re-shore nation" with businesses bringing production back to the UK, encouraged by cheaper energy costs and the lure of shorter customer chains.

Cameron will hold out the example of the United States where collapsing energy costs owing to fracking have led businesses to relocate back to the US.

He will say: "There is no doubt that when it comes to reshoring in the US, one of the most important factors has been the development of shale gas which is flooring US energy prices with billions of dollars of energy cost savings predicted over the next decade.

"I believe these trends have the ability to be a fresh driver of growth in Europe too. I want Britain to seize these opportunities. I think there is a chance for Britain to become the Reshore Nation."

Chuka Umunna, the shadow business secretary, said: "The Tory-led government came to office promising an export-led recovery but the UK's trade deficit is growing. Any help for manufacturers is welcome after three damaging years of flatlining and in a month where factory orders have fallen back.

"But after so many government schemes have failed to deliver for business, manufacturers will want to see what this one offers in practice."

Cameron's hopes for a boom built on fracking are not shared by the energy department, which is much more ambivalent about the ability of Britain – for geological, political and environmental reasons – to match the US fracking boom, at least not for more than a decade.

The prime minister will try to rebut internal critics tired of the Tory party's negativity by striking a more optimistic note. He will say: "For years the west has been written off. People say we are facing some sort of inevitable decline. They say we can't make anything any more.

"Whether it's the shift from manufacturing to services or the transfer from manual jobs to machines, the end point is the same dystopian vision – the east wins while the west loses, and the workers lose while the machines win. I don't believe it has to be this way. If we make the right decisions, we may also see more of what has been a small but discernible trend where some jobs that were once offshored are coming back from east to west."

To back the rhetoric, UK Trade & Investment will join forces with the Manufacturing Advisory Service to launch Reshore UK, a service to help companies bring production back to Britain.

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UK unemployment: challenge for Carney as jobless rate expected to fall

Falling unemployment has raised speculation the Bank of England could alter or abandon its forward guidance policy

Britain's unemployment rate is expected to have come down again when official data are released on Wednesday morning, bringing cheer to the government but a challenge to the Bank of England.

Economists forecast the jobless rate edged down to 7.3% in the three months to November from 7.4% in the three months to October, according to a Reuters poll.

That would be the lowest rate for more than four-and-a-half years and continues the trend of unemployment falling faster than BoE policymakers had been expecting. That has raised speculation the Bank will alter, or even abandon, its forward guidance policy, under which it vows not to consider an interest rate rise until unemployment has fallen to 7%.

The improving headline figures on the labour market from the Office for National Statistics echo business surveys indicating many firms are more optimistic about hiring now the recovery is picking up pace.

"We believe that it should be very easy for the unemployment rate to fall to 7.3% in this week's November reading and more likely will fall to 7.2%," says Alan Clarke, economist at Scotiabank.

James Knightley at ING said the labour market data was likely to show "broad strength".

"The UK has created nearly 1.3 million jobs since the nadir of the labour market in early 2010, 250,000 of them in the past three months alone. Initially they were largely part-time jobs focused in London and the south-east, but increasingly they are full-time positions and located all around the country," he said.

The latest manufacturing sector survey from the CBI on Tuesday showed a bigger proportion of companies expect to lift their employment over the coming quarter. Howard Archer, economist at IHS Global Insight, said that "fuels belief that the unemployment rate could very well get down to the critical 7% threshold level, under which the Bank of England could raise interest rates, by the middle of this year".

But not everyone believes the jobs recovery is evenly spread across the UK. The TUC trade unions group this week said the recent pickup in jobs had failed to reach the north-east, the north-west, Wales and the south-west, leaving them in the same situation or worse at providing jobs than they were 20 years ago.

At the same time, although employment has picked up, wage rises have remained on average below inflation, meaning many workers are worse off in real terms.

Economists forecast Wednesday's data will show annual average earnings growth of 1% for November, excluding bonuses. That marks an increase from 0.8% growth in October but is still well below inflation which came in at 2% for December.

At the same time as the unemployment data, the Bank of England releases the minutes to its latest policy meeting. Policymakers held rates at their record low of 0.5% at the meeting but economists think there was probably a discussion among members of the monetary policy committee (MPC) as to whether the unemployment threshold should be lowered.

Samuel Tombs at the thinktank Capital Economics said: "Some of the more hawkish members might be in favour of sticking to the original guidance. But we suspect that a majority will have begun to consider how they could alter their guidance in order to get market interest rates and sterling down from present levels that, if left unchecked, could soon begin to take some of the pace out of the recovery. Indeed, we believe that there is a strong chance that the MPC will lower the unemployment threshold next month to coincide with the Inflation Report."

Some economists say it is time to move on from forward guidance.

Rob Wood, chief UK economist at Berenberg bank, says the Bank should "let forward guidance wither" and return to targeting inflation.

"When the BoE introduced forward guidance just six months ago, they saw only a 50% chance that unemployment would fall to 7% by mid-2016. That is now likely in the next few months," he said.

"Lowering the unemployment threshold would unnecessarily tether the BoE to a dangerously low target. A rate rise is not needed now, but it will be needed before unemployment gets to 6.5%."

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Inflation slows again in November to four-year low

British inflation edged down in November to its lowest level in four years, giving the Bank of England plenty of breathing space to keep interest rates at a record low even as the economy picks up speed.

Consumer prices rose 2.1 percent on the year in November, the slowest increase since November 2009, as the impact of higher gas and electricity prices had yet to be felt, the Office for national Statistics said. Economists taking part in a Reuters poll had expected inflation to stay at 2.2 percent, its rate in October.

Compared with the previous month, the consumer price index in November was up 0.1 percent, the ONS said. Separately, house prices in Britain rose at their fastest pace in October in just over three years. Annual inflation has exceeded the Bank of England's 2 percent target every month since December 2009, steadily eating into the pay of British workers and making living standards a big political issue ahead of the 2015 elections.

Despite above-target inflation, the BoE's focus remains on nurturing an economy which is growing more quickly than most other industrialized countries but remains smaller than before the financial crisis.

The BoE has said it will only think about raising record-low interest rates once unemployment falls to 7 percent, unless inflation expectations threaten to get out of control.

Figures due on Wednesday are expected to show unemployment stayed at 7.6 percent in the three months to October.

The ONS said on Tuesday that the slowdown in November's inflation figure was partly due to fruit and vegetable prices as well as the later introduction this year of hikes in power tariffs.

An ONS official said last year's increases in utility prices affected inflation in November but were only expected to impact the CPI in December this year.

An underlying measure of inflation, which strips out increases in energy, food, alcohol and tobacco, rose by 1.8 percent in November compared with the same month last year.

Data also released by the ONS on Tuesday showed that factory gate prices rose by 0.8 percent in annual terms, slower than economists' predictions of a 0.9 percent increase.

Some economists expect inflation pressure to grow in the coming months when the impact of the recently announced prices rises for household heating will be felt.

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UK unemployment rate at lowest since 2009

The UK unemployment rate has fallen to its lowest level since 2009, official figures show.

At 7.4%, this is the lowest rate since the February-to-April period in 2009, the Office for National Statistics (ONS) said.

The number of people out of work fell by 99,000 to 2.39 million in the three months to October, the ONS said.

Prime Minister David Cameron told MPs the figures showed that "the plan is working".

Mr Cameron said: "There should not be one ounce of complacency because we have still got work to do to get our country back to work and everyone back in work means greater stability for them, greater ability to plan for their future, greater help for their families.

But the plan is working, let's stick at it, and get unemployment down even further."

But Labour leader Ed Miliband, while welcoming the news, said more people are working part-time because they could not get the hours they need.

This 7.4% rate compares with a figure of 7.6% for the three months to September, and is below the rate analysts had expected.

The number of people claiming Jobseeker's Allowance in November fell by 36,700 to 1.27 million.

In Northern Ireland the unemployment rate was slightly higher at 7.5%, while Scotland's figure was 7.1.%. England and Wales matched the national figure of 7.4%.

The North East of England had the highest unemployment rate, at 10.1%, while the lowest rate was 5.6% in the East of England.

The North East also had the highest claimant count rate at 6.1%, compared with the South East, which had the lowest, at 2.3%.

Earnings pressure

Average weekly earnings growth, including bonuses, picked up by 0.9% in the three months to October compared with a year earlier, the ONS said, a slight improvement on the three months to September.

Excluding bonuses, pay grew by 0.8%.

But this is still well below the level of inflation - currently running at 2.1% - meaning that people's earnings are still falling in real terms.

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The ONS data also showed that the number of people aged 16 and over who are in work was at a record high of 30.09 million, up 250,000 compared with the May-to-July period.

The percentage of the workforce in the public sector - 18.8% of those in employment, or 5.7 million people - fell to its lowest rate since the current data series began in 1999.

'Spectacular strength'

Economists welcomed the latest jobs figures.

David Tinsley, UK economist at BNP Paribas said the UK labour market was "showing spectacular strength".

David Kern, chief economist at the British Chambers of Commerce, said: "These are very strong labour market figures, which back our recent forecast of increased growth in the fourth quarter of this year."

And Chris Williamson, chief economist at Markit, said: "The official data are now confirming the upbeat signals from business surveys, which have shown the fastest rates of job creation since the late 1990s in recent months, as firms respond to a marked pick up in demand."

The Bank of England has said it will not consider raising interest rates from their record low of 0.5% until the unemployment rate falls to 7%.

But even then, governor Mark Carney has said an interest rate increase is not guaranteed.

The pound jumped against both the dollar and euro after the release of the jobs figures, as expectations rose that UK rates could rise sooner than forecast

The Bank's nine-member Monetary Policy Committee (MPC) was unanimous in voting to keep interest rates on hold, minutes from its December meeting revealed, and to leave the central bank's £375bn programme of quantitative easing unchanged.

The MPC believes inflation could fall to its target level of 2% early in 2014, the minutes show, but it is concerned that sterling's recent 2% rise against other currencies could jeopardise the UK's economic recovery.

The UK grew by 0.8% in the third quarter of 2013, and the Bank is forecasting growth of 2.8% next year.

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UK unemployment rate falls to 7.7%

Closely watched indicator takes tentative step towards 7% that could trigger rise in interest rates from Bank of England

Britain's unemployment rate has fallen to 7.7%, in the first tentative step towards the 7% target Bank of England governor Mark Carney says may signal an economy strong enough to withstand a rise ininterest rates.

The jobless rate has become a closely watched indicator in the City since the Bank's monetary policy committee introduced its policy of forward guidance, promising to leave borrowing costs on hold at their record low of 0.5% at least until unemployment falls to 7%.

Unemployment on the broad International Labour Organisation measure tracked by the Bank stood at 2.49 million from May to July, down by 24,000 from three months earlier, according to the Office for National Statistics (ONS).

That took the unemployment rate to 7.7%, from 7.8% over the previous three-month period, driven by a larger-than-expected 80,000 increase in employment.

On the more timely claimant count measure, which just includes people receiving out-of-work benefits, unemployment also fell, by 32,600 in August to 1.4m.

Sterling surged to a seven-month high against both the euro and the dollar after the news, as investors continued to bet on a stronger recovery than the MPC expects. "Markets are clearly ignoring Carney's 'low rates for longer' pledge and driving sterling higher in currency markets," said Nawaz Ali, market analyst at Western Union.

Carney used his first set-piece speech as governor to set out the reasons why he doesn't expect unemployment to fall sharply over the next two years; and stress that the 7% threshold was a "staging post", which need not trigger an automatic rate rise.

Chris Williamson, chief economist at data provider Markit, said: "The upturn in the labour market bodes well for the sustainability of the wider recovery, as more people in employment and rising wages should help boost economic growth further. The improvement also increases the possibility that unemployment could fall faster than the Bank of England expects, meaning an earlier hike in interest rates than 2016, as currently envisaged under the Bank's 'forward guidance'."

There were 334,000 new jobs created in the economy between June and a year earlier, the ONS said – the latest period for which figures are available – with the largest increase, of 117,000, coming in health and social work, within the private sector. With the housing market starting to show signs of life, there was a 77,000 rise in the number of people employed in "real estate activities".

Despite the improving picture, there was also evidence in the detail of the figures that conditions in the labour market remain tough for many.

Average pay rose at an annual rate of just 1%, or 1.1% including bonuses – well below the 2.8% rate of inflation – suggesting that living standards are still being squeezed.

The ONS also highlighted the fact that much of the increase in employment – almost all of it, for women – has been in part-time work, in many cases taken up by employees who would prefer a full-time job if they could find one.

Almost a third of men, and 13.5% of women, in part-time work or self-employment would prefer to be in a full-time role, according to the ONS.

Long-term unemployment has also remained stubbornly high: while overall unemployment has fallen by 105,000 over the past 12 months, the number of people unemployed for more than a year is little changed, at just below 900,000.

Young people are also failing to feel the benefit of the upturn, with youth unemployment 9,000 higher in May to July than three months earlier, at 960,000.

Article Source : http://www.guardian.co.uk

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UK economy: a miraculous recovery – or a blip in a longer-term decline?

The UK seems to be experiencing a remarkable economic turnaround – but how is it comparing with the US and Europe?

In Newcastle-upon-Tyne, property prices are racing ahead. Over the last year it ranks as Britain's top performing city, with an 11% jump in the cost of buying a home.

London lags behind the capital of the north-east with a 5.2% increase, though it remains the most expensive region.

The forecast is that prices will soar over the next couple of years as the turnaround in Britain's economic fortunes begins to feed into the property market.

In the last month, the economy has stepped up a gear. Manufacturing and construction industries have fallen in step with the already resurgent service sector to push the UK well ahead of Germany, France and the rest of the eurozone in the growth stakes.

When the latest GDP figures appear next month, the UK could outstrip the US, which has propped up the world economy since the financial crash of 2008.

Economists are now asking whether George Osborne has found a magic formula. Such is the confidence in Britain's new-found vigour that some experts are questioning the Bank of England's low-interest policy, which Threadneedle Street said only last month should last until 2016, such is the underlying weakness of key sectors in the economy.

So is the UK recovery real? Is it just a short-term burst in property dealing before the longer-term realities of a slow decline reassert themselves? And how does the UK compare with other countries?

UK unemployment. Credit: Guardian graphics

Employment/pay

Since the financial crash, workers across the developed world have been forced to price themselves back into work. Workers in Spain, Ireland, Germany and the UK have accepted the equivalent of zero-hour contracts that come with low pay and few benefits.

Britain's unemployment rate is now below 8% – although still above the 7% level being targeted by the Bank of England. As a result of immigration, there are almost 2m more people in the UK than in 2008, and many have found jobs.

However, this expansion in activity has not fed through into wage packets. The TUC has calculated that in the last five years average pay has fallen by 6.3% in real terms. A worker putting in 40 hours a week is £30.30 a week worse off, taking inflation into account, than in 2008.

Studies shows that four in every five jobs created since 2010 have been in low-pay sectors.

Wage rises in 2013 are averaging 2%, while inflation is running at 2.8%. A report on Monday by the Recruitment and Employment Confederation (REC) and KPMG shows the sharpest rise in salaries for full-time staff since 2008, but the REC also found that short-term appointments are at their highest since July 1998 – showing that employers are still seeking a flexible workforce.

A surge in the number of new jobs in the last 18 months has cut the US unemployment rate to 7.3%, its lowest for four years. But much of the fall is due to people leaving the job market altogether, mainly due to baby boomers retiring, younger people staying in college, and poorer workers claiming disability benefits. The US employment rate is 63.2% compared with 71.5% in the UK. In July a lacklustre 169,000 extra jobs were created, less than the 400,000 needed before the unemployment rate falls meaningfully.

In July, EU unemployment was at 11% , with the eurozone at 12.1% – both up half a percentage point on July 2012. That meant 26.6 million unemployed – roughly equal to the entire population of the Netherlands and Belgium combined.

The situation is much more concentrated among young people, with 5.5 million under-25-year-olds jobless.

Despite the crisis, salary levels have risen everywhere in the EU in recent years, with the notable exception of Britain and the bailed-out countries of Greece, Ireland and Portugal.

The EU's highest earners, the Danes, enjoyed gross average earnings of €60,000. Its poorest, the Bulgarians, get €4,668.

Exports

The financial crash of 2008 brought with it an inbuilt spur for recovery – a low exchange rate. While the indebted countries of the eurozone were tied to an exchange rate dictated by Germany, the UK could cash in on a 25% decline in the value of sterling.

Exports of goods are up, but the rise has disappointed ministers, who believed manufacturers would grab a golden opportunity to win market share in fast-growing countries such as Brazil, China and Turkey. Manufacturers have increased their output in response to an increase in domestic demand and turned away from cultivating export orders.

Without the revenues from North Sea oil and gas production, which have proved insufficient to counter energy imports since 2004, the UK's industrial position looks weak.

The service sector, which includes the City, the advertising industry and £9bn education export business, has maintained a surplus over imports throughout the last five years. However, exports of services have remained flat.

Maintaining Washington's spending budgets between 2009 and 2012 against attacks from conservative forces in Congress kept the economy growing. That is the Keynesian view inside the White House and among liberal commentators, who argue that the reason the US economy is larger than it was in 2008 (the UK economy is still 2.7% smaller) is the result of government spending and investment.

Like Germany, the US has benefited from huge demand from China and the far east for industrial equipment and cars. As a result, exports have grown steadily and proved a major impetus to growth.

Germany, along with China, is the global export champion, and while the crisis has hurt purchases of German goods in parts of the EU, its performance continues to excel, helping the EU to a rising exports record.

German exports grew 4.3% last year to over €1tn, according to the federal statistics office, with a more than 10% increase in sales to non-EU countries compensating for stagnation in European exports.

EU exports collapsed by more than €200bn in 2009 compared with the previous year, but have since recovered.

Article Source : http://www.guardian.co.uk

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UK unemployment expected to fall as nascent recovery feeds through to jobs

Economists expect claimant count to fall by 8,000, while Bank of England minutes will shed light on MPC's decision making

The number of people out of work and claiming benefits in the UK is expected to have fallen again last month as the economy's nascent recovery feeds through into the jobs market.

Official labour market data due at 9.30am on Wednesday will show an 8,000 fall in the claimant count in June, according to a Reuters poll of economists, while the unemployment rate for May is expected to remain at 7.8%.

Expectations for an improvement, at least on some measures of the labour market, follow a range of surveys suggesting companies are tentatively hiring new staff as the economy show signs of recovery.

Howard Archer, economist at IHS Global Insight, said: "The latest employment and unemployment data show improvement after the jobs market faltered early on in 2013. We expect further labour-market improvement to be evident in the figures out on Wednesday, supported by recently healthier economic activity.

"We now expect unemployment to be broadly stable over the next few months, before starting to edge lower from the end of 2013."

He predicted employment in the private sector would gradually pick up but that would be offset by an expanding labour force and further job losses in the public sector.

The UK unemployment rate is expected to stay at 7.8%. PhotographThe thinktank Capital Economics is less optimistic than the consensus on the drop in claimant count, expecting a fall of 5,000 in June after a fall of 8,600 in May. It is also cautious about earnings growth, forecasting an annual pace of 1.5%, just above the median forecast for 1.4%.

"With unemployment still high and productivity growth weak, underlying wage growth probably remained subdued," it said in a preview of the data.

That wage growth contrasts with a retail price rate of inflation of 3.3%, according to official data on Tuesday, meaning real wages continue to fall. The TUC says workers have now suffered falling real wages for more than 40 months – the longest lasting squeeze since 1875-1878.

Separately at 9.30am on Wednesday, the Bank of England releases the minutes from new governor Mark Carney's first monetary policy meeting, when rates were held at 0.5% and there was no change to quantitative easing (QE). The minutes will sum up the discussion and show how the nine committee members voted.

On the whole, economists expect the vote against more QE in July to have been seven members to two, compared with 6-3 at King's final meeting in June when he joined Paul Fisher and David Miles in calling for £25bn more in asset purchases.

Although Carney's first policy meeting ended as expected with interest rates pegged at their record low and no further QE on top of the £375bn so far, he still surprised markets with a statement alongside the decision.

The MPC used the release to say that there was no need for the recent sharp increase in yields on government bonds, which would indicate that interest rates were due to rise. It was only the sixth time in its 16-year history that the MPC had issued a statement alongside a decision to leave policy unchanged.

Article Source : http://www.guardian.co.uk
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Angela Merkel: youth unemployment is most pressing problem facing Europe

In interview with the Guardian, chancellor promotes merits of Germany's dual system of schooling and work experience, and says she regrets impact of eurozone crisis on young people

Angela Merkel has said youth unemployment is the biggest crisis facing Europe and urged other governments to do more to copy the German system – concentrating on apprenticeships and not simply academic study – to prevent the emergence of a "lost generation".

In an interview before a summit to tackle joblessness among young Europeans, the German chancellor said her country's tried and tested dual system – a mix of classroom learning and on-the-shop-floor work experience – was the best way forward at a time when almost six million under-25s in Europe are out of work.

"Youth unemployment is perhaps the most pressing problem facing Europe at the present time," she told the Guardian and five other European newspapers. "We in Germany have learned a lot from successfully reducing unemployment by means of structural reform since reunification and we can now bring that experience to bear."

Twenty European Union heads of state and all of the bloc's 28 labour ministers have descended on Berlin to hammer out concrete measures to deal with the problem. Economists say the young generation faces the very real prospect of ending up worse off – materially, professionally and socially – than their parents because of the evaporation of jobs in Europe.

Hundreds of twentysomethings have told the Guardian of their endless job frustrations: receiving rejections because they are overqualified, writing scores of unanswered letters, unable to build a life without a job to structure it around.

Merkel has been blamed for compounding the situation by insisting that southern European economies balance their books rather than spend money on job-creating policies. But she dismissed the suggestion that her jobs drive was a way of boosting Germany's poor public image abroad three months before she faces a general election.

She said the Berlin conference on Wednesday was about best practice, pointing out that Germany had halved its youth unemployment since 2005. "We are now in a position to offer a place on a [dual system] training programme to every young person who wants one," she said. "That wasn't always the case … One thing that experience taught us is that there is of course no need for any country to introduce the whole dual system straight away. Inter-company vocational training can be an alternative.

"We should not just try to make our young people more academic," she said. "Germany is seeing the positive effects of skilled workers and master craftsmen having an excellent reputation too."

Angela Merkel is hosting summit in Berlin to tackle joblessness among young EuropeansMerkel exhorted young Europeans as well as employers to become more flexible, calling for greater mobility in Europe. She said that with language barriers often preventing mobility, she wanted to open up the Erasmus exchange programme to include vocational training.

Five years of economic crisis have prompted thousands of Europeans to migrate in search of work. Southern Europeans are now coming to Germany in record numbers, and Merkel quipped that while not all of them would enjoy the conditions offered to the Spaniard Pep Guardiola as Bayern Munich's new coach, they would be given good chances in Germany.

"We have no intention of expanding the low-wage sector, as there is a great demand for skilled workers, which cannot always be met by Germans, although they remain of course our first priority. To reiterate, Europe needs a more mobile labour market. To that end, the way students and academics move around the single market as a matter of course could be better reflected among skilled workers."

Last week Europe earmarked an extra €6bn to tackle youth unemployment. However, Merkel said: "Money alone won't be enough. We will need intelligent reform."

She stressed that contrary to widespread accusations that Germany was trying to impose its ideals and economic models on souther European countries, she did not expect everyone to conform to the strict German model.

"It's absolutely fine for a country to want to structure its economy in a completely different way to Germany's," she said. "I'm always pleased to see different roads leading to success. But what nobody can negate is the need to be competitive and to work for and earn prosperity. When I look at Italy, Spain or Greece I do see very different, successful industries.

"What is crucial is that we all realise how much the world has changed. China, India, Brazil, South Korea and many other countries have been competing with us [Europe] for quite some time in areas we used to dominate … We either offer those parts of the world attractive and innovative products, or we resign ourselves to losing market shares and therefore prosperity, which is precisely what I do not want, either for Germany or for Europe".

Speaking on the sixth floor in the cuboid chancellery in Berlin, with its sweeping views over the Tiergarten park and the sea of cranes that continue to reconstruct the German capital almost 23 years since reunification, Merkel said it was up to governments to solve the problems so as to prevent the social unrest that has been increasingly visible on the streets of southern European towns and cities in recent years.

"When things start to become dysfunctional, it is the job of politicians to remedy the situation. Youth unemployment has been much too high in some countries for many years and now the crisis has driven it even higher. That is unsustainable in a continent with an ageing population. We must not allow there to be a lost generation".

Merkel said the plight of young people was one of her major regrets about the crisis. "I am sorry that it is often those who had absolutely nothing to do with those wrong turnings, the young or the poor, who bear the brunt of the hardship today … It is highly regrettable that parts of the economic elite assume so little responsibility for the deplorable situation."

Highlighting another cultural difference between the approaches taken to the crisis by Germany and other parts of Europe, Merkel said the word "austerity" had entered her vocabulary for the first time only after the crisis had been well under way, as she preferred the term "sound budgeting".

"I see no dichotomy between sound budgeting and growth," she said. "The road we have now started on is therefore the right one, with budget consolidation on one side and fundamental structural reform on the other. That is what will bring sustainable growth."

Asked whether she had ever personally faced the worry of being out of work, Merkel – the daughter of a protestant pastor who moved his family to communist East Germany when she was six weeks old – said: "Fortunately not. In the first few years when I became a politician, I did sometimes think about what I would do if my political career suddenly came to an end.

"I imagined running a jobcentre," she said. "It's a pleasant task to help people find work."

She said her experience as an MP since 1990 in the northern state of Mecklenburg-Vorpommern, where the unemployment rate has dropped from 25% to 10% in recent years, had taught her how important it was to have experienced advisers on hand helping young people on a local level. "The [young people] need both to be given hope and to be pushed into investing their own energies … that can't be done centrally by Madrid or Berlin."

So has she now, on a far grander scale than she might ever have imagined, finally fulfilled her wish by becoming Europe's jobs tsar?

"No," she answered, appearing faintly annoyed by the question. "My task is to set the right political course in Germany and alongside my colleagues in Europe."

Article Source : http://www.guardian.co.uk

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