Thursday, April 23, 2009

Desperately seeking a recession

So, right now there is a recession going on that will be deeper and longer than anything in the 1970s, 80s or 90s, right? And the public finances are in the most dire state since the end of the Second World War and unemployment has passed 2 million whilst worklessness is above 5 million, correct?

OK, so answer me this, where is it? Where's what you say? Where is the recession around me? Where are these great swathes of unemployed? Don't get me wrong, I don't disbelieve the economy has been buggered harder than a rent boy, I'm just having trouble getting my head around where the dire situation really is in front of me, and trying to understand why that is.

After all, think about it for a second, in the 1970s we had massive three day weeks across the country. Power cuts. Strikes that left the rubbish uncollected and dead unburied. In the 1980s we had riots, we had boarded up shops, and whole towns with almost 100% unemployment. This time round, which is apparently much much worse those visible realities are not nearly as clear are they?

Feel free to correct me on this. Perhaps its just where I live and what I do to earn money that is causing this confusion in me. Don't get me wrong, I know there are businesses closing like Woolies etc, I know that people are being made redundant, but even so, it still doesn't feel like were in the hole that we clearly are in, and I want to know why that is.

I have this theory, which I discussed briefly with a friend the other day - who basically had similar feelings that it really didn't feel like we were in a worse situation than the 70s, 80s and 90s even though we know that we are - the theory goes like. The recession of the 00's (notice we've had one a decade for the last 40?), is one that happening in a largely private employment economy which is diversely spread geographically, so the effects, which are severe when we talk about raw numbers, are being more geographically spread with the result that you don't see the recession quite so much.

Has anyone else noticed the strange way we're in a complete and greater mess compared to previous messes but it just doesn't feel like that when you walk out and about on the street? Don't get me wrong, I'm not trying to say "oh it's not that bad" more that whilst it is really bad the perception of that bad through your own eyes doesn't look anything like the times which were apparently not nearly as bad.

I want to know why, or perhaps its just me and the handful of people I've spoken too?

41 comments:

Alan Douglas said...

A) We have been anaesthetised (sp?)

B) there is much more money sloshing around via Social, so many are not quite so knowingly desperate

C) Any idea that we can DO anything about it has been crushed out of us (see A)

D) People's credit cards are probably still taking the pain, that has not fed through yet

E) For those who see that there could be a way out, there is this election within spitting distance, and the British are a very patient and tolerant nation.

Perm any number of the above, off the top of my head, to find the true answer.

Alan Douglas

Barnacle Bill said...

I know what you mean young dizzy, where I live we have three new large housing estates that have been mothballed basically.
I actually saw a brick lorry going into one and collecting up the packages of bricks still around the site the other day.
My eldest daughter has experienced friends of hers' made redundant recently at a well known luxury goods manufacturer.
Yet the shopping outlet/ entertainment village near to us seems as busy as ever.
So yes it has me scratching my head as well?

wonderfulforhisage said...

The reason, dear boy, is that we've got a new credit card and are planning to spend getting on for £200bn on it this year and hundreds of billions on it in following years.

The interest on it doesn't matter because we'll roll that up with the debt. Neat eh?

Then we'll die and I suppose the kids will have to pay it off, or maybe emigrate, or perhaps just default.

Anyway enough of this gloomy thinking about the future, life is here to be lived. Drink up, it's my round.

Anthony said...

I've been going through the same thought process myself. Out on the streets, it is definitely a bit quieter and in a lot of places there are an increasing number of empty shops, but it doesn't "feel" like a severe recession at all.

Perhaps it is due to the same reasons that got us here in the first place - loose credit.

Though it has allegedly tightened up, it is still ridiculously easier to buy things on tick than in previous recession.

The changes in bankruptcy laws could be part of the phenomenon.

I'm in the camp that believes the manifestations of our current malaise still have not played out fully. Folks still have their credit cards, something they didn't have in previous recessions.

Anonymous said...

Basically it's because we are still in the eye of the hurricane, where it is calm. About 42% of spending in Britain is by the government, who are still spending at the moment. When the market forces that to be cut, then you will notice the effects, probably before the end of the summer.

Anna Raccoon said...

Dizzy,

This recession is mainly hitting the prudent, the cautious, the savers.

They are not responsible for burying the dead, digging the coal, emptying the bins.....

Labour have contrived a recession for Conservative voters in the main, and they simply don't riot.

The people who might be inclined to riot are insulated from it all - the public sector.

People are suffering, but they are the stiff upper lip brigade.....

Even the so-called 'right-wing' bloggers who are sounding off about the terrible things that Labour have done to their country - their focus is just that - 'to my country' - not to 'me'.

Events dear boy, events said...

Your right. It is all a myth fabricated by Brown so he could save the world in the hope that it would win him the election . The irony is it has affected the banks, industry and small businesses that can't get credit, etc etc.

The problem for all of us is that Brown's myth is going to affect us all for years to come, as we pay off huge debts, unemployment soars and the public services deteriorate.

If you are in secure employment and living in leafy London (I don't whether you are) all looks well. It will get a whole lot worse but not yet. The patient has to be kept happy until after the election.

Stuart said...

Hi Dizzy

Good question, and a discussion that I've been having with Wifey.

It's like this. You max out on a credit card. Then you max out on another. And so on. Your accountant tells you that you're screwed and that the best thing that you can do is to wind yourself up into an IVA (aka legally renege on your debts). Anyway, you carry on and then one day you can't get any more credit. And consequenty cash. Then the shit hits the fan.

The UK is just about to max out its credit. This is when an IMF bail-out may be needed and this is when all hell breaks out.

I live in the South East and I agree we work diversly. Most people who live North of Watford Gap are emplyed by the state so they won't be affected until Govt spending is reduced. Then you won't be disappointed...

dizzy said...

"This recession is mainly hitting the prudent, the cautious, the savers."

I am not prudent, or cautious and not a saver but its not hitting me - I hasten to add "yet" of course.

Half The Story said...

Unemployment has only ticked up a bit, when we add over 100k a month on the dole queue this year it will affect people.

The real effects will be reduced consumption.

I checked the price of holidays for this and last year and for the same week there is a 20% rise next year, even for booking now. That is where people will suffer, and will choose what they do.

John of Enfield said...

Within our extended family an IT Contractor & an Architect have suffered pay cuts or loss or work.

In our circle of friends 3 senior professionals have lost jobs or suffered unwanted early retirement.

A friend with a hitherto successful building business is not winning any more contracts even though he is bidding below cost. He is layng off staff. A large business run by a family member has also suffered a massive drop in revenue. Staff have gone.

Some nephews & nieces who have just graduated are unable to obtain permanent employment. Their focus, unusually for our family, is now on getting jobs in the public sector - such as health & education.

So as far as I am concerned there is clear evidence of difficulty in getting employment.

Th great fear I have is for the next 18 months: -

Economic journalists are forecasting that Unemployment (the visible bit) will grow by between 1 million and 1.5million in the next fiscal year.

You will notice that!

The really frightening bit is when the government does what it will be forced to do & tries to balance the budget. This will be AFTER the the forthcoming General Election and then no-one's job will be safe.

Not even yours.

So, my advice is, keep developing this excellent blog!

Anonymous said...

Wait until interest rates go up to 10% - you'll see it then!

BigDai said...

The comments about the geographic dispersion of the pain are probably true as the view that this has hit the Tory middle classes. However, the main point must be that the effects of recession are lagging. Currently, people are cutting back, being prudent, putting off purchases. Those made unemployed are running down saving. The real problems will come as unemployment goes on rising. The newly unemployed become the long term unemployed, the saving start to run out. Interest rise to attract Gilt investors and homes are repossessed and property prices head for 60-70% declines. There is a LOT more pain and nastiness to come.

Thatcher-right said...

I'm just about to get the chop - along with half the engineers at our place.
Doesn't seem an awful lot of point in killing myself looking for a new job, though. I may as well run down my savings before the government does it for me.

Oldrightie said...

Alan Douglas and others here have made excellent responses to you very good question. I pose a further theory . It is the Left that carry the chip on the shoulder nastiness that results in violence spilling over. It is an inbred bullying persona when frustrated by perceived though imaginary justice. They ignore The Thatcher years of saving the economy and allowing many working class people to own homes and become very well off. Many of these people have left money to family, are living abroad or otherwise OK. Yet none of those positives are accepted. She is vilified for reducing Union power and breaking the miners' strike. All necessary but painful. We face a re-run of all that only far worse. Then the left will be out of power and the McBride tendency will ensure rioting and violence. All a consequence of the apparent calm now

Jess The Dog said...

The recession and depression is definitely out there.

I work in the construction/ engineering sector. My company has no external shareholders so we've been immune from a lot of the devastation the sector has felt (some companies have laid off thousands). However, we've been warned of likely redundancies and the process has started (I'm safe....for the moment).

Most of the companies I work with have laid off staff and even public sector recruitment has effectively been frozen. The Middle East - traditionally the cash-rich safety net - has taken a hammering as well.

The housing market is at a standstill and the evidence for that will be released shortly as councils publish their annual housing completions figures. Housing also drives investment in other infrastructure.

Remember - this is supposed to be the sector that drives the recovery, major infrastructure projects being brought forward, fiscal stimulus etc. It simply isn't happening!!!!

There are two reasons why the effects are not more manifest, as they were in the 1970s.

1. There is a bubble of debt that is sustaining the public sector - this will pop!

2. Employment patterns are more fragmented, rather than monolithic industries sustaining communities. The effects will be spread over commuter dormitory towns and city centre apartment blocks.

Beware of Geeks bearing GIFs said...

It's simply that we haven't got to the stage of being refused another credit card.

People's redundancy pay is keeping them buoyant at the moment. People are using their credit cards.

All we are doing, like the government, is borrowing more to sustain the status quo.

We can be rest assured that this won’t be like any other recession. When the IMF are brought in (perhaps even this year) then you will see the mother of all civil unrest that this country has never seen.

Once the public sector and welfare collapses, it’s game over. Unfortunately, it will happen on Cameron’s watch I fear.

Still, under martial law I couldn’t want to be brown – he’ll be taken out quite quickly I imagine. Probably for the price of two tins of beans.

wv:crimater

Croydonian said...

This recession is largely hitting the service sector, and where this differs from past slumps is that this form of employment is fairly evenly spread across the nation and does not have powerful unions. If all of Woolworths' employees had been based in, say, Gateshead or Northampton, then ghost town etc parallels with the closures of steel works, mines and so forth would have been far more obvious.

Anonymous said...

Happy St George's Day!
http://www.youtube.com/watch?v=YbK9lYEEi4Y

Guthrum said...

Had the same discussion. I think it can be called the stiff upper lip recession. It is hitting the white middle classes hard, destroying savings and pensions, destroying hundreds of thousands of small businesses started since 1979.

These people are slowly despairing, getting ill with stress, or packing up and leaving the country, twelve of my friends have moved their businesses abroad in the last six months, as have I.

The Government will only fire brigade big , highly visible enterprises, not 2-50 employee SME's, and finally watch East Enders or listen to the Archers, the recession does not happen in LaLa land because the Government controls the output of the BBC.

Plato said...

As above - I'm a freelancer and work started to dry up several months ago - I am down to the last of my savings and plastic beckons.

I think we will start to see the wheels come off in another 6 months, but even then it is the client state/payroll vote that are protected.

If the Tories were in office, they'd be getting a terrible caning from their natural base.

Great Big Billygoat Gruff said...

Moot point there Dizzy

I live in Euroland and was back in the UK in January - February.

I was expecting doom and gloom, £ devalued affectively by 30% etc but nowt.

Prices in pubs for good grub still expensive by European levels and lots of new cars ( last year's model) whizzing about.

People still maxing their second credit card, in denial etc???

Anything imported will now be under new contracts and expect to see fruit, veg and some meats (as producers export thereby setting a new per kg price within UK) so the poor will be feeling it, the mortgaged up to hilt brigade could be getting a breather, if they have the right mortgage deal, the people entering the chain are stuffed, and the pensioners are totally stuffed.

Mixed bag but screws are on and on everybody soon.

Darling is just hoping that God will intervene and growth will start next year before too many people are without food and roof.

The ZaNULab experiment is goosed.

Ghost of Callaghan said...

Be patient. First the purse strings have to be tightened and a few significant pay claims turned down. Then watch the public sector and transport unions collude to make our lives a misery. Again.

Alex said...

It is destroying the white middle aged middle classes. There are only 2 people in our village over the age of 50 who have jobs in the private sector and one of them runs a hedge fund. The rest of the over 50's are either unemployed, "consulting", working for the NHS or early retired on a pittance against their wishes.

I know plenty of highly qualified, very experienced and very competent people who are looking for work, and whose talents are quite frankly wasted. Many do not count as unemployed because a little bit of consulting makes you self-employed as far as the DWP is concerned.

The massive government overspend (i.e. unproductive employment) and unemployment are 2 sides of the same coin. The UK does not have sufficient demand to sustain full employment, hence all the xcess government spending.

Anonymous said...

It's simple - ZaNuLab are refusing to fund the public sector at a level thats proportionate to the tax take - hence the gigantic PSBR.

They'll lose the next election, and let the Tories deal with it, which is when the required cuts will arrive and the unions etc will kick off.

Its utter cowardice and moral bankrupcy on display but will it enable the Labour party to win the following election?

At the end of the day, when the labour voting drones and workshy scum outnumber the people prepared to work and pay the bills then you know the game is up for the UK.

gaw said...

Martin Wolf from the FT said something along the lines of we're not feeling it yet because the government has carried on spending money as if nothing has happened, just trying to get themselves through to the next election. Link:

http://www.ft.com/cms/19ff3c76-29a8-11de-9e56-00144feabdc0.html?_i_referralObject=1100031979&fromSearch=n

I think the agenda is to rosy things up until the election and leave as much shit behind as possible with the hope that the Tories won't cope and we'll be in next time. Revolutionary defeatism I think it's called.

Womble On Tour said...

It doesn't feel like we're in the hole yet because we're only just entering it. Thus far we have barely got below ground level.

But, believe you me, we're entering alright; it's going to be very deep and we'll be in it for a very, very long time.

Mike Rouse said...

I can agree with the sentiments in your post. For me I am busier than I have ever been in my little start-up business. For my friend who is a fifty-something factory worker it's a lot more grim. Also, for my other friend who is a saver. I guess it's different things to different people. I'm certainly feeling the pinch, but not had many obstacles thrown up yet that are a direct result of the recession.

Obnoxio The Clown said...

I live in a smallish town that still has pretty much all I need on a day to day basis. I haven't seen any real evidence of a depression here. However, today I went into my "local" city and was absolutely stunned by how many shops had closed down and how many places were boarded up (including some of the shops that I specifically wanted to go to.)

So it's not all beer and skittles, obviously.

Not a sheep said...

Give it time Dizzy, give it time.

Jabba the Cat said...

It is perhaps the most significant difference between this recession and the last one under Labour that the unions are firmly in their coral having to weigh any potential strike action against possible court sequestration of their assets.

This lack of industrial action and aggravated union rhetoric makes for a surreal and isolated disconnect for most people from the real and ongoing economic collapse in this country.

T'old 'un said...

Sorry for the length of this. You may get to the end before the money runs out.

The total folly of it all, and the totally lfor the in can be understood by trying to grasp the following.

Let us initially assume for the purpose of this exercise that there is no such thing as taxation and no such thing as a Welfare State, and no such thing as inflation. Let us also, for the sake of simplicity, assume a man starts his working life at 20 and retires at 65 and lives to be 80 (45 years of work and 15 years of retirement).
A simple bit of arithmetic shows that he needs to save one third of his income over his working life in order to fund his retirement.
Since there is no inflation his salary/wage will increase only in line with his increasing skills and abilities. And so his average salary for his 45 years of work will be that that he was receiving in his 43rd year, and the sum he has saved will just fund this standard of living level.

However, if he is like most men he will have married (or partnered) and have 2.5 children. He will have probably bought a house and furnished it. He will have had to pay for the education of those children and the healthcare of the family. They will have wanted holidays, school uniforms, play stations etc etc. and this will have made a damned big hole in his “pension fund”. As will weddings and grandchildren etc. not to mention refuse collection, and the few other local authority “services” that are of any value.

So at the end of his years of work how does he stand with regard to his “pension fund”? If he has been very careful he may be reasonably placed. If he has taken the modern day approach of “spend spend spend” he will be found seriously wanting.

Now let us look at the present debacle.
There is an extremely serious side to this issue, that is currently being brought to it's ultimate conclusion. An issue that was never taken into account (if it was ever considered in the first place). It must, however, have been realised by some people in government over the years, hence the mad insane need to maintain "population growth" by what ever mean possible.

People of “working age” constitute roughly 60% of the total population. Currently, (late 2008) according to the latest figures, approximately 25% of the population of working age is unemployed, so only 45% (¾ of 60%) of the total population is employed. The figure for the percentage of the working population currently employed "in the public sector" is 30%. That means that only 30% of the total population is engaged in "creating" wealth. This figure is reduced still further when one looks at several areas of the the "private sector" that are supporting the public sector (e.g. "outsourcing" services, consultancies, auditors, etc gobbling up billion upon billion of pounds).

As a result of this, the wealth, created by the efforts of 30% of the population, is having to support the entire population. This support must cover the Welfare state (Health, Pensions, Care Workers, Snoopers, Immigrant handouts) and all Government costs. This ridiculous situation is exacerbated by the fact that a good proportion of this wealth is shipped out into other countries, either by the by the companies which own the wealth making operations, or by subterfuges used by UK companies to avoid taxes. Of the wealth that does not get "exported" a significant quantity goes in salaries and "bonuses" to non productive "fat cats", who again manage to "off shore" much of it.

So less than the earnings of 30% of the population (some of it having been exported to central Europe by 2+ million immigrant workers) is having to "keep" the entire population, having to finance any new hare brained whim of the Westminster Asylum, and having to have some left over for giving out to any passing dictator, or fighting other people's wars, or interfering in other countries affairs or even shoring up the odd bank or two that falls on hard times.

How will any conventional government disengage itself from this?

no longer anonymous said...

I've noticed an increase in shops closing in my hometown (especially Woolworths) but that aside I don't see any evidence of a recession. The town is just as busy as it always has been, there don't seem to be many glum faces. Then again though unemployment in Surrey is relatively low.

At work there's more evidence of a recession - it's very quiet (I did nothing for 2 days last week) and we had to lay off a load of people recently. However, when I look out of the office window and see all the cranes in central London it does look as if the economy is ticking along as normal (which is especially strange bearing in mind how badly the real estate market has been spanked).

Council Estate Freak said...

No recession here either. All the usual council estate chav behaviour. There is a taxi driver who owns a Bentley, a painter and decorator across the road who loads paint into his brand new 4x4 BMW every morning. Not how I envision a recession to look like.

DiscoveredJoys said...

I think we are in a period of 'Phoney War'.

On the down side there are many more closed shops than usual. Some housing developments have stopped work. I know of people who have taken a pay cut. Prices are generally going up, especially for imported items. And if you look carefully in the supermarkets you will notice that they are carrying less stock on their shelves and their fruit and vegetables are of lower quality than a year ago.

Against this though you have the public sector still thrashing away, not yet affected by spending cuts. You also have many people paying less for their existing mortgages allowing them to continue purchasing their usual items, even though they cost more.

Eventually the interest rates will have to go up, and the government of the day will have to substantially cut costs. Everything will then get very obviously unpleasant.

denverthen said...

Why did you notice last time, Dizz?

Because during last really deep recession, '79-'82 - and throughout the '80s - the Left launched a truly massive campaign, from individual union member level all the way up to The Foot, against the Tories.

As part of that campaign they successfully created the universal impression that the whole of Britain was a decrepit, stinking Victorian inner city run by evil toffs. And since they were ably aided and abetted by a largely sympathetic mass media, large parts of the general public swallowed the Left myth whole.

They still do.

As a child of the 70s and 80s I guess I was particularly susceptible to it. But because I was from the south east of England, what I experienced for myself every day and what I saw on the TV were entirely different realities.

I also have close ties with South Wales and I can remember at that time, while there was high unemployment and relatively low income, recession? No. People just got on with their lives and did the best they could.

So, what's the reason for your weird feelings? Recessions only ever hit the poorest the hardest - they have the least to lose, but they often lose it anyway. Everyone else (the vast majority of people) take the inevitable hits but are usually too busy with getting on with their lives genuinely to care very much.

But the biggest, most significant reason BY FAR is that there is no sordid, perfidious, relentless, disloyal Left-wing myth-making going on.

You can bet your bloody life there will be the moment they're kicked out. Then decrepit, Victorian, stinking inner cities run by evil toffs will reappear, as if by magic, overnight.

Can't wait.

David said...

I reckon it's because we have a Labour government. The usual agitators know which side their bread is buttered and are keeping schtum. Once the Tories won the next election, they'll come crawling out of the woodwork, striking, rioting etc.

judith said...

Two friends in their 50s made redundant recently, ex-son-in-law (high flying forex trader) unemployed since last Sept, freelance journalist son seeing work dry up so has cancelled plans to move to a better home.

More shops being boarded up in local High St.

Dept stores in local town centre more than half empty of customers over last few weeks.

As pensioners, we were considering replacing our 5yr old car this year, but not now.

This will be a far more insidious depression than the 70s; the demise of trade union power means there will not be the spectacular strikes, and it will take some time for the generation bred to borrow and spend to learn to scrimp and save.

Anonymous said...

All the core Labour voting areas of the North are being swamped with public sector 'non-jobs' and hand outs to keep them quiet. The unions are bankrolling the Labour party and have no desire to see their members walk out on strike and harm their investments in this failed Government.
As others have said, Brown will keep on borrowing until he A. loses the election and can hand the can of shit to Cameron or B. Until he has no option but to go cap in hand to the IMF after winning another term

Alex said...

The economy has been in decline for nearly two years, and it started in the bank market with bank failures. Look at the graph of interbank bid-offer spreads on 3 month deposits in the Budget report.

http://www.hm-treasury.gov.uk/d/Budget2009/bud09_completereport_2591.pdf

Look at the graph on p. 194:

Chart B3: Spread of 3-month sterling interbank lending rate
over expected policy rates

When this suddenly rose in August 2007 the banking market tightened and there was no funding available for new busiess. You wouldn't have noticed the effects this immediately if your job was in government or capital unintensive service industries, but if you were involved in manufacturing of large capital goods, construction, property, aviation or shipping/transport you would have seen business drop off quite rapidly.

It has taken about eighteen months for this to pass through the economy so that it is obvious to everybody from the government borrowing figures.

Truculent Sheep said...

The thing to remember is that recessions in the UK have always been regionalised. For example, there were parts of the UK that were booming in the 1930s even as the old industrial cities were in deep decline. This one shouldn't be any different to the others in that regard.