By BECKY BARROW Warning: David Blanchflower Around two million people will be unemployed by Christmas as the credit crunch bites, a key Bank of England policymaker warned yesterday. Professor David Blanchflower said he predicts 2,000 people will lose their jobs every day over the next four months. This would take unemployment levels to their highest since Labour came to power in 1997. For families up and down the country, redundancy would be devastating at a time of soaring household bills. Millions of people are barely coping with rising food, fuel and gas bills, and will be crippled if they lose their job - particularly if they are the sole breadwinner. Young people will also be affected, with 'no jobs' for hundreds of thousands of children when they leave school, he warned. In an interview, Professor Blanchflower, who is a member of the Bank's Monetary Policy Committee, gave a series of warnings about Britain's economic meltdown. He says that Britain is already in a recession which is in danger of being 'very serious and long-lasting' unless urgent action is taken. And he admits his original forecast that house prices will fall 30 per cent might be 'optimistic' and the drop could be even sharper. And as a further blow to workers, he says those who keep their jobs will not get a pay rise, or will get one which is below inflation. His interview, with the news agency Reuters, will worry workers up and down the country who fear that their job is no longer safe. As one of the nine people who set interest rates every month, he is one of the most powerful economic voices in the country. Every week, more companies admit that they have had to sack staff in a bid to cope with the economic crisis. In the past few days, one housebuilder, Bovis, said it has cut 40 per cent of its staff and rival Taylor Wimpey has axed 900 jobs. And to make things worse for those who lose their job, many will face an impossible struggle to get a new job because firms have 'stopped hiring'. Professor Blanchflower, an economics lecturer at Dartmouth College in the U.S., said: 'I am expecting to see a number of something like two million by the end of the year. School leavers are coming into the jobs market and there are no jobs for them. 'People have to start to respond to the fact that we are in a recession and the danger is that we will be in a very serious and long-lasting recession unless we do something..' 'I certainly think we are in negative growth now and I expect several further quarters.' He also launched a veiled attack on his fellow members of the Monetary Policy Committee. At the last 11 meetings, Professor Blanchflower has voted to cut interest rates. But other members, including the Bank's governor Mervyn King, have largely ignored him, and voted to cut rates on only three occasions since October. He said: 'To sit and worry about inflation expectations and what is going to happen to those, rather than worry about the fact that the economy is going to go into a recession, seems to be misguided.' Tory Treasury spokesman Philip Hammond said: 'This is a startling prediction from a member of the Bank of England's Monetary Policy Committee. 'If it turns out to be true, it will represent a meltdown in employment and yet more misery for families in the months ahead.' There is already evidence that unemployment is starting to rise sharply as bosses are forced to cut staff to cope. The latest figures from the Office for National Statistics show 60,000 became unemployed between April and June, raising the total to 1.67million. On a welcome note, 56-year-old Professor Blanchflower, who has dual British and American nationality, said inflation is 'going to plummet like a rock'. The consumer prices index measure of inflation is currently 4.4 per cent, its highest level for 16 years and more than double the Government's target. He also said a 'substantial' fall in the interest rate, which is currently at five per cent, is needed and 'probably quite quickly.' Professor Blanchflower said he feels a weight on his shoulders' for failing to convince other committee members to cut rates sooner to avert the current crisis. A Treasury spokesman said: 'The Government recognises that this is going to be a challenging year for all of us, but the fundamentals of the UK economy remain strong. 'Employment remains near record highs, interest rates are historically low and the past decade of rising incomes and job creation puts us in a much stronger position than in previous decades.'
Unemployment rate could hit two million by Christmas, Bank of England warns
Last updated at 1:56 AM on 29th August 2008No jobs left for school leavers
Britain is already in a recession
House prices could fall more than 30%
Workers will not be getting a pay rise
Friday, 29 August 2008
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