Robert Peston Robert Peston

How does Boris Johnson save the economy?

Boris Johnson (photo: Getty)

‘For the first time since records began, there are fewer unemployed people than job vacancies,’ the ONS says. The number of unemployed people in January to March was 1,256,846 whereas vacancies in February to April 2022 rose to a new record of 1,295,000. At a time when we may already be in recession, and we certainly face it later this year, this is extraordinary.

Part of the explanation is that hundreds of thousands of people have voluntarily left the Labour market, as the Bank of England’s governor Andrew Bailey told MPs yesterday. One explanation is that large numbers of people have long Covid and cannot work. Others are clinically vulnerable and are choosing not to work because they don’t wish to take the health risk when Covid remains prevalent. Covid has therefore had the opposite long-term effect on the economy than was widely feared.

The greatest Covid risk was thought to be the collapse of businesses, mass long-term unemployment and a prolonged slump. But £400 billion of government employment support avoided that crash. There are consequences however, and an unusually tight labour market – more vacancies than unemployed people – is one.

With inflation most acute in the basics of living – energy, food – it is the poorest who are suffering most

A manifestation is that pay including bonuses was 7 per cent in the first quarter, or 1.4 per cent higher than the inflation rate prevailing then. This is the past, even if the recent past. Inflation is now rising much faster than pay, pensions and benefits, because of what the Bank of England describes as an unprecedented succession of shocks, that began with Covid’s disruption to global supply chains and has been ‘apocalyptically’ magnified (as per the Bank governor’s fears) by war in Ukraine.

With inflation most acute in the basics of living – energy, food – it is the poorest who are suffering most.

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Robert Peston
Written by
Robert Peston
Robert Peston is Political Editor of ITV News and host of the weekly political discussion show Peston. His articles originally appeared on his ITV News blog.

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