The Current Performance of the UK Economy


INTRODUCTION:


To assess how successful a country\'s economy is we have to look at a number of factors, these include: Unemployment, inflation, Economic growth, trade, exchange rates and Interest rates. The \'ideal\' for a country is normally to have low unemployment, low and stable inflation, an avoidance of excessive exchange rates changes, steady economic growth and trade surplus rather than a trade deficit.


UNEMPLOYMENT


Unemployment is defined as " a broad term to describe those willing and able to find work but unable to obtain a job". One of the measures of unemployment in the UK is called the \'claimant count\'. It is based upon the number of people who are claiming unemployment benefits. It has the advantage that it is quick and easy to construct because it is based of information already collected by the government. However, it is often criticised for being inaccurate, not all of those out of work will claim benefits, and some of those out of work are not actively seeking a new job (although this is carefully checked). People claiming the benefit may have another job and therefore be claiming the benefit illegally.


A number of \'groups\' of people who are looking for employment but are unable to find it also do not appear on the government lists. The list only includes people between 18 and 60, if you don\'t belong in this age bracket then you are not officially recorded as being \'unemployed\'.


Another method of measuring unemployment is the \'Labour Force Survey\'. This uses the International Labour Organisation definition of unemployment which includes \'all people of working age who, in a specified period, are without work but available for work in the next two weeks an who are seeking paid employment.\' Since April 1998, this survey has been given greater prominence whilst the claimant count has been downgraded. The measure is based upon a survey, which is carried out four times a year. It also collects more information on things such as ethnic origin. Qualifications and those seeking part time rather than full time employment. It also has the advantage that because it uses an international definition of \'unemployed\' the unemployment rates in different countries can be more accurately compared. Unfortunately it is expensive, time consuming and as it is based on a sample survey it is subject to sampling error.


Unemployment in the UK in June 2001 stood at 5% (down from 5.5% in June 2000). In 1987 3 000 000 people were unemployed in the UK, of this number, 1 200 000 were female and 1 800 000 were male. Between 1987 and 1990 unemployment fell to 2 000 000 people of whom about 1 100 000 were male and 900 000 were female. Unemployment rose again between 1990 and 1993 to 3 000 000 before steadily falling to about 1 800 000. Between 1987 and 1998 unemployment among females stayed fairly steady, at an average rate of just under 1 000 000, it is the male unemployment figures which have dictated the overall trend for the UK.


Unemployment for June 2001 was 5%, this was down 0.5% on June 2000. This figure is 3.3% lower than the \'Euro area\' (8.3%), 3.8% lower than France (8.8%) and 4.3% lower than Germany (9.3%), so when compared to Europe the UK unemployment rate is relatively low. It is currently the same as Japan\'s but 0.5% higher than in the US.


INFLATION:


One of the main measures of inflation in the UK is the Retail Price Index (RPI). The RPI measures the changes in the prices of consumer goods. The Office of National Statistics (ONS) calculates the RPI in three phases. Firstly they find out a family expenditure survey to find out what people buy and how much the pay for them. About 7000 households are asked to record what the buy and the cost of it over a two week period. These households are drawn from across the country from different socio-economic groups. Low income pensioners and the top 4% of income earners in the country are excluded form this survey because they would buy radically different things for different amounts than the rest of the country. The ONS then \'weights\' the items people buy, e.g.: if someone spends £500 in a