Unemployment In Scotland Falling But Stimulus Needed
18th July 2012
9,000 employment boost does not disguise need for UK policy change.
The First Minister today called on the UK Government to urgently stimulate economic growth and jobs following the publication of new Scottish GDP and labour market figures.
The latest labour market statistics, published by the Office for National Statistics and covering the 3-month period March to May 2012, show employment in Scotland is rising and unemployment continues to fall. Scotland now leads the UK on all three of the headline labour market indicators. The Scottish unemployment rate is now lower, the employment rate is higher and the economic inactivity rate lower than the UK averages.
The GDP figures which were published today by the Scottish Government, however, show a marginal 0.1 per cent fall in economic output in the first three months of 2012. This represents a stronger performance than the equivalent UK fall of 0.4 per cent but is still enough to take the Scottish economy into a technical recession.
The fall in Scottish GDP was entirely driven by a drop in the construction sector while the services and production sectors continued to expand. Construction sector output fell by 6.9 per cent over the quarter, compared to 0.2 per cent growth in services and 1.2 per cent increase in production sector output.
The Scottish economy has demonstrated greater resilience than the UK economy which contracted by 0.7 per cent cumulatively over the last two quarters compared with a 0.2 per cent fall in Scotland for the same period.
The labour market statistics for March to May 2012, showed that Scotland continues to have a higher rate of employment and a lower rate of economic inactivity than the UK. It is the fourth month of published statistics which shows a rise in employment and a fall in unemployment, and the twentieth consecutive month of Scotland's headline employment rate remaining higher than the UK as a whole.
The labour market figures show that unemployment in Scotland fell by 4,000 over the three month period, with the rate falling by 0.2 percentage points to 8.0 per cent. The UK unemployment rate also decreased by 0.2 percentage points to 8.1 per cent.
The headline level of employment, for the population aged 16 and over, increased by 9,000 over the same period. Scotland's headline employment rate, for people aged 16 to 64, rose by 0.1 percentage points to 71.4 per cent, higher than the UK rate of 70.7 per cent.
The youth employment rate for 16-24 year olds in Scotland is 54.5 per cent compared to 49.1 per cent in the UK with the Scottish youth employment rate increasing by 0.7 percentage points over the year. This represents a welcome indication that the Scottish Government's drive on youth employment is beginning to yield results.
First Minister Alex Salmond said:
"These new figures show Scotland has a higher employment rate than the UK as a whole and that our economy continues to demonstrate greater resilience than the UK. But it is clear that the UK's Government's austerity agenda and the Prime Minister's failure to heed calls for direct investment in construction and infrastructure is hampering progress.
"The contraction in the Scottish economy has been driven by a fall in construction output of 6.9 per cent over the last quarter. This has pushed Scotland into a technical recession despite growth in the last two quarters in both the service and production sectors as a whole which together account for around 90 per cent of the Scottish economy.
"The Scottish Government has consistently argued for the need for capital investment to boost, not just construction, but also the wider economy. Indeed the Scottish Government submitted a list of shovel-ready projects to the UK Government in February, but no immediate action has yet been taken by the Prime Minister or his Chancellor. Announcements about rail investment in three years time are no substitute for capital spending now.
"Last month we announced our plans for a £105 million package of economic stimulus which will maximise opportunities to create jobs and growth. These plans have been warmly welcomed by the construction industry and they will also deliver benefits for key industries including renewables, tourism, transport and housing.
"Monday's downward revision by the IMF to their growth forecast for the UK economy in 2012 to just 0.2 per cent demonstrates that more needs to be done by the UK Government to kick-start the economy in the form of capital investment to stimulate growth and jobs.
"Monetary policy alone cannot deliver the boost the economy needs. Without the traction of a fiscal stimulus and the investor confidence it will create, quantitative easing, on its own, can be like pushing on a piece of string.
"Today's u-turn of providing guarantees to loan finance of up to £40 billion is welcome but is subject to companies having the confidence to invest in major infrastructure projects and meeting the necessary criteria. This scheme will take a year or more to get off the ground but investment is required immediately.
"Therefore, we now need a further Budget u-turn with an impact to make an immediate difference. We need direct capital spending on shovel ready projects to the tune of some £5 billion. The Scottish Government would guarantee that our £400 million plus share would be allocated in this financial year.
"In Scotland we are working tirelessly, within our powers, to stimulate growth but we need the UK Government to do the same. This is not only our opinion, but that of the CBI and the STUC amongst others.
"With the full economic and financial powers of independence we could do even more to raise Scotland's competitiveness and drive forward economic recovery. In the meantime the UK Government must deliver substantial capital investment immediately to promote growth and jobs."
