Heading for the double-dip?

Submitted by Matthew on 4 August, 2011 - 1:05

On top of the public sector job cuts, private-sector industry is cutting jobs too.

On 27 July the bosses’ association CBI published survey results showing that most manufacturing employers plan to cut jobs over the next three months.

Until spring this year, manufacturing employment was increasing a bit from its slump levels in 2009. The increase was not enough to validate the coalition government’s claim that public sector cuts, by holding down public debt levels and so interest rates, will produce a counterbalancing private-sector boom. But there was an increase. No longer.

Manufacturing bosses are planning to cut spending on new plant and machinery. The Bombardier Derby job cuts are not exceptions, but part of a pattern.

If the government reduces its contribution to effective demand in the economy, and households plagued by debt and redundancies do the same, then the whole economy must go down unless exports boom.

The eurozone crisis and the US budget crisis make the prospects poor for exports.

Expansion is not the first priority for the bosses. Their first priority is restoring their rate of profit from the hit it took in 2008-9, and taking advantage of the slump to reshape workplaces, wages, and workforces so as to allow bigger profits in a future expansion.

So far, top bosses at the top 100 companies have seen their median earnings rise 32 per cent last year (Financial Times, 27 July), while workers’ real wages have dropped 2.7% (Daily Telegraph, 13 July).

The financial and insurance sector paid £14 billion in bonuses in the last financial year (FT, 19 July) — not as high as the £19 billion in 2007-8, before the crash, but heading upwards fast.

The rate of profit — the net rate of return for private non-financial companies — in the UK reached its peak in the last quarter of 2007. It was 15.1%, the highest figure since consistent statistics began in 1965.

With the crisis, it dropped to 10.8% in the third quarter of 2009.

Since then it has risen steadily, to 12.7% in the first quarter of 2011.