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Unemployment was going to rise and remain high till end of the year damaging the UK productivity says a think tank

Date: (5 May 2012)    |    

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The National Institute of Economic and Social Research (NIESR) a think tank has said that the UK unemployment was going to rise from its current 8.3% to almost 9% by the end of the year causing permanent damage to the UK’s productive capacity.
It said that the continuous weakness in the economy was unparalleled. The growth in 2012 would be close to zero growth in 2013 it said.
On Thursday, the CBI had predicted a growth of 0.6% this year and 2% next year.
Official figures from the Office for National Statistics (ONS) last week showed that the economy shrank by 0.2% in the first quarter, returning the UK to recession.
NIESR acknowledged that later revisions may change this, but said such smaller movements were more or less immaterial to the broader picture of an economy that remains very weak.
In its latest forecast on UK economy it said that the monthly estimate of GDP suggested the level of economic activity in the economy in March 2012 was the same as in September 2010.
It is does not make it a sustained recovery, so the question of whether or not the economy was technically in a double-dip recession was debatable.
The think tank further said that four years after the start of the recession, the economy was still well over 4% below its pre-crisis peak, showing unprecedented weakness over the period.
It said it expected unemployment to remain high until 2013, which was likely to do "permanent damage to the supply side of the economy, with large long-run economic costs".
However, NIESR said its growth estimates were essentially unchanged from its January forecast and it expected inflation to fall below the Bank of England's 2% target by the end of the year.