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State of the Scottish Economy
Richard Murray
Office of the Chief Economic Adviser
26th March 2010
Synchronised Global Downturn
Output Remains Below Pre-Crisis
Levels
Quarterly GDP Index (Q2 2008=100)
104
Start of
Synchronised
Downturn
102
100
Index
98
96
94
92
90
88
86
Q1-2005 Q3-2005 Q1-2006 Q3-2006 Q1-2007 Q3-2007 Q1-2008 Q3-2008 Q1-2009 Q3-2009
Source: OECD
Germany
Japan
UK
US
Scotland Remains in Recession
Scottish & UK GDP Growth
(Quarter-on-Quarter)
1.5
1.0
0.5
Percent
0.0
-0.5
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
-1.0
-1.5
-2.0
-2.5
-3.0
Scotland
UK
2009
Q1
2009
Q2
2009
Q3
2009
Q4
Broad-Based Decline in Output
Performance of Scottish Sectors During Recession
0
Total
Cumulative Change in GDP
-2
-4
-6
-8
-10
-12
-14
Production
Construction
Services
Scottish Unemployment Continues
to Rise
Scottish & UK Unemployment Rate
9
8
7
5
4
3
2
1
Scotland
UK
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
0
20
Percent
6
Flexibility in UK Labour Market
Change in UK Average Hours and Earnings
% Change on Previous Year
6
4
2
0
Q1
Q2
Q3
2006
Q4
Q1
Q2
Q3
2007
Q4
Q1
Q2
Q3
2008
Q4
Q1
Q2
Q3
2009
-2
-4
Average Hours
Average Earnings (including bonuses)
Q4
Decline in UK Net Lending
Future Prospects
Scotland Close to Emerging from
Recession
Markit PMI Scotland Survey of Private Sector Output
60
55
50
45
40
35
Aug- Nov- Feb- May- Aug- Nov- Feb- May- Aug- Nov- Feb- May- Aug- Nov- Feb- May- Aug- Nov- Feb05
05
06
06
06
06
07
07
07
07
08
08
08
08
09
09
09
09
10
Total
Services
Manufacturing
Modest Recovery Forecast for
Scotland
Latest Independent Forecasts for Scottish GDP Growth
4
Forecast
3
GDP Growth
2
1
0
2001
-1
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-2
-3
-4
-5
-6
Official GDP
FAI
(Feb 10)
Experian
(Nov 09)
Item Club
(Nov 09)
Cambridge
(Mar 10)
2012
Treasury’s Latest Forecasts
UK GDP Forecasts
% Change on Previous Year
4
2
0
2009
2010
2011
-2
-4
-6
Budget 2010
Average Independent Forecast
2012
Risks Facing the Recovery
Withdrawal of fiscal stimulus measures
Fiscal consolidation
Further adjustment required in financial
sector
Concluding Thoughts
Scotland close to emerging from recession
Unemployment continues to rise
Risks from the global economy & fiscal
consolidation
Modest growth predicted in 2010
Impact of the recession on
young people
Susan Anton
Lifelong Learning Analytical Services
27 March 2010
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Ju 5
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Ju 7
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Ju 8
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Ju 9
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Ju 0
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Ju 1
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Ju 2
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Ju 3
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Ju 4
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Ju 5
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Ju 6
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Ju 7
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Ju 8
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Ju 9
n0
Ju 0
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Ju 1
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Ju 2
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Ju 3
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Ju 4
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Ju 5
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Ju 6
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n
Claimant Count 18-24 Years
Claimant Count
Unemployment 18-24 Year Olds
Historical Claimant Count Unemployment Levels 18-24 Year Olds
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
ILO Youth Unemployment 16-24 Year Olds
Oct-Dec 2008
Oct-Dec 2008 Oct-Dec 2009
100,000
ILO Unemployment Levels
20.0%
ILO Unemployment Rate (%)
Oct-Dec 2009
15.0%
10.0%
5.0%
0.0%
80,000
60,000
40,000
20,000
0
16-24
25-49
50+
16-24
25-49
50+
ILO Youth Unemployment 16-24 Year Olds
Unemployment Rate 16-24 Year Olds (%)
Oct-Dec 08
Oct-Dec 09
• Scotland had highest
percentage point increase
over year in 16-24 ILO
rate
25.0
20.0
15.0
• However, it still retains
second lowest youth ILO
rate in UK
10.0
5.0
0.0
Northern
Ireland
Scotland
UK
England
Wales
• Map indicates areas
which have seen the
largest increase in
their share of
additional
unemployment since
February 2008 for the
18-24 age group
• Central belt and the
Borders seen the
largest increase
Industrial breakdown of workers
in Scotland
Industry
16 to 21 year
olds in FT
Employment
All
Workers
Difference
Agriculture and Fishing
2.8%
2.1%
0.8%
Energy & Water
3.2%
3.0%
0.2%
Manufacturing
11.3%
10.0%
1.3%
Construction
17.1%
8.3%
8.8%
Distribution, Hotels & Restaurants
28.4%
18.9%
9.6%
3.8%
5.9%
-2.0%
Banking, Finance & Insurance etc
12.5%
14.3%
-1.8%
Public Administration, Education & Health
14.0%
31.8%
-17.8%
6.8%
5.8%
1.0%
Transport & Communication
Other Services
Source: Annual Population Survey (July 2008 to June 2009)
Impact of Economic Situation
Education at a Glance 2009, published by the OECD says that across
the 30 member countries, the economic crisis may -
‘increase the incentives for individuals to
invest in Education, as worsening Labour
Market prospects lower the opportunity
costs of Education, such as earnings
foregone whilst studying’
Source: EAG 2009
http://www.oecd.org/document/24/0,3343,en_2649_39263238_43586328_1_1
_1_1,00.html
Timing of the Statistics
• THE PAST – 2008/09 ACADEMIC YEAR
• What do the latest official statistics say?
•
In 2008/09 there were an additional 3,240 Scots entering First Degree
HE in Scotland (up 3% on 2007/08) to 101,905
•
The amount of total ‘activity’ in Scotland’s Colleges increased slightly
(by 0.6 per cent) on the amount seen during the previous year
•
2008/09 Academic Year coincides with start of recession
•
However given lead-in times to participate in HE and FE, the impact of
the downturn will be more limited (See Chart 1)
Chart 1: Scotland’s Official Unemployment Rate since 2007
8.0
Scotland's Unemployment Rate
7.0
6.0
Start of
2009/10
Academic
Year
5.0
4.0
3.0
2.0
Start of 2008/09 Academic
Year (Similar to when the
recession started)
1.0
0.0
Feb-Apr May-Jul Aug-Oct Nov-Jan Feb-Apr May-Jul
2007
2007
2007
2008
2008
2008
Source: Labour Force Survey (LFS)
Aug-Oct Nov-Jan Feb-Apr
2008
2009
2009
May-Jul Aug-Oct Nov-Jan
2009
2009
2010
Timing of the Statistics
• THE PRESENT – 2009/10 ACADEMIC YEAR
•
What do the latest official statistics say? – We wont know for sure
until January 2011! But we do know..
•
2008/09 School Leavers in Scotland displayed markedly different
behaviour from the previous year (See Chart 2). Staying-on rates in
School also increased
•
An extra 5.6% of Scots applied for and accepted a place to do HE in
the United Kingdom in 2009/10 (the vast majority will be in Scotland) UCAS
Chart 2: School Leaver Destinations, 2002/03 to 2008/09
40
2009/10
Academic Year
Higher
Education
35
30
25
20
Employment
Further Education
15
2002/03
2003/04
2004/05
2005/06
2006/07
Source: School Leaver Destination Statistics 2008/09
2007/08
2008/09
Timing of the Statistics
• THE FUTURE – 2010/11 ACADEMIC YEAR
•
Will depend in large part on how the economic and Labour Market
situation continues to develop over the coming months.
•
There is an expectation of greater numbers of people leaving School
in the Summer
•
UCAS suggest large increases in the number of people applying to do
Higher Education. Their first release, in February 2009, reported a 31%
increase in Scots applicants. When you remove those additional
applications due to procedural changes, the increase is 21%. This is
similar to the UK as a whole.