The below was in the guardian today. I offered a brief comment.
My comment.
The economy is in a dire state. The pandemic has done untold damage and caused unemployment to rise. As we move out of lockdown firms will hold off re employing workers as they evaluate the long term position. We have to remember unemployment is a lagging indicator and whilst firms may have held on to workers via the furlough scheme without this available they will shed workers when necessary as the economic environment becomes clearer.
The economy will also see the full effects of Brexit coming into play. The deal the government has achieved is very narrow indeed. There is now lots of extra paperwork which represents as cost to business to export and import from the EU. Those extra costs can only be imposed on the economy via higher prices, efficiency gains via lost jobs, or lost trade opportunities. The deal also had significant complications for the fishing industry and excludes other sectors such as financial services, the price here will be again jobs and valuable export revenue which is an injection of money into the economy. Foreign investors are likely to shy away from Britain until the Post Brexit trading climate becomes clearer. This too can only limit jobs growth in the short to medium term.
The government is also in a tough position as it has spent to support the economy. The obsession with spending cuts as a way to reduce the deficit will also come into play. Cuts tend to hurt the economy and we will see aggregate demand being suppressed. This will again hurt income growth and businesses are less likely to take on workers , especially in the public sector. The alternative of taxes rising to pay off the deficit is unpalatable for many but this may have to become a reality. The government should also remember borrowing is cheap at the moment and those that spend and develop infrastructure often reap longer term rewards via higher tax revenue.
Econgreenwood 