The coronavirus lockdown will trigger a “very big” surge in unemployment that could take seven years to subside to levels seen before the epidemic, MPs were warned today.
Torsten Bell, chief executive of the Resolution Foundation think-tank told members of the Treasury Select Committee that there had been “way too much talk” of a V-shaped recession with a swift bounce-back from a sharp downturn, dashing the hopes of Chancellor Rishi Sunak.
He described the nine per cent forecast of peak unemployment from the Office for Budget Responsibility as “relatively optimistic”.
If the rate hits 10 per cent, the lessons from past recessions suggested it will be seven years before dole queues shrink to levels seen early this year, he added.
He said that the sectors that hired jobless workers most quickly after the financial crisis — hospitality and retail — were likely to be among the worst hit by the pandemic slump.
There was also less likely to be a sustained fall in real wages — a factor that helped keep a lid on unemployment after the banking crash.
Paul Johnson, director at the Institute for Fiscal Studies, told the committee that there are “a lot of gaps” in the state’s financial support package.
He said: “There are possibly as many as two million company owner-managers, 650,000 or so self-employed people who set up since April 2019, 200,000 self-employed people earning over £50,000 and others working outside the scheme.”
