The economy is moving in Gordon Brown’s favour. The embattled prime minister, lagging 10-12 points in the polls, will take heart from signs that UK unemployment – the second most important economic indicator for this property-obsessed nation after house prices – is rising more slowly than feared at the time of the Budget. Wednesday’s data, showing growth in unemployment slowed in the three months to August, provided fresh grounds for hope that fears of a big post-recession rise in joblessness were overdone. Unemployment is likely at some point to cross the sensitive 3m mark, but this is more likely to take place after, rather than before, any May election. The number of people out of work rose by 88,000 to 2.47m, the lowest quarterly rise for 13 months. The headline International Labour Organisation-harmonised unemployment rate in the three months to August was unchanged at 7.9 per cent.
Since Labour stands accused by its Conservative opponents of being the “party of unemployment”, a continuation of this trend could provide the government with a shot in the arm, particularly if it eases downward pressure on wage growth. Furthermore, it comes after signs of improving consumer confidence in the UK. As Capital Economics has observed, there has historically been a close relationship between measures of consumer confidence and the incumbent party’s lead in the opinion polls.
Confidence is almost back to levels that might normally put the government into the lead. Capital Economics suggests Mr Brown could be even more encouraged by the traditional relationship between incumbent poll ratings and consumer expectations for the economy. If the recovery continues, a Conservative majority is far from being a foregone conclusion. Paddy Power, like other betting sites, offers odds of 3-1 on a hung parliament. These odds could tighten.
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