Unemployment 'could reach three million', economist warns

Sunday 25th January 2009

An economist who warned Bank of England colleagues of an imminent recession has said he fears unemployment could reach three million in a year's time.

David 'Danny' Blanchflower, a US-based labour market expert, also said UK interest rates will "obviously" hit the near-zero levels seen in the US.

He told the Sunday Times he was particularly concerned about rising unemployment among young people.

"When unemployment rises, it rises more among the young. The most worrying number in the latest statistics was that of the 131,000 rise in unemployment, 55,000 was among 18-24 year olds," he told the Sunday Times.

"Then there's the worry about the Class of 2009 and the people who will be entering the labour market in June. This is a big problem. Unemployment when people are young really matters. There are 600,000 18-24s unemployed now, 14.5 per cent already. That's my concern."

Unemployment rose to 1.92 million in the three months leading up to November, the highest for a decade.

"It would be hard to think we would not get to three million, perhaps in a year's time. If you take the experience of previous recessions, three million might be optimistic," Mr Blanchflower added.

A member of the Bank of England's monetary policy committee (MPC) since June 2006, Mr Blanchflower's calls for interest rate cuts to prevent a recession were ignored over the past year due to inflationary concerns.

He told the newspaper MPC members had "got behind the curve".

Mr Blanchflower added: "If you look back to what I was saying in January 2008, a year ago, it was that we needed to cut interest rates to avoid a recession."

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