Unemployment and inflation
All the indications now are that the Government has under-estimated unemployment trends; and that the figure of unemployed in the normal official statistics will be at least one and a quarter million by the end of the year, and probably a good deal higher. Of course, it has been clear for some time that statistics from the Department of Employment are both inaccurate and exaggerated. So, even by the end of the year, the unemployment problem will be nothing like as bad as it looks. For the purposes of political argument, however, the effect of the figures, whether accurate or not, is what really counts; and the effect of steadily rising figures is likely to be of the utmost political importance. It is also the case that the trend is now clearly towards higher unemployment, and that there is nothing the Government can do about it. This trend is the first serious indication of the effect in terms of work of a prolonged period of inflation.
Those who have argued that inflation can be corrected only by adjusting monetary policy have always been attacked because of their willingness to contemplate with equanimity the unemployment that must follow such adjustment. Their reply has always been that a continuing inflationary policy will ultimately produce a far more devastating effect on the work force than monetary action undertaken as a means of controlling inflation. Over the next year or so they will be shown to be right.
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