David Prosser: Where are all the jobs going to come from?

Outlook Yesterday's unemployment figures are not much of a Christmas present. We have been expecting the labour market to take a turn for the worse, but most economists believed that the jobless figures would not start ticking up again until the new year. Worse, beneath the headline data there are some really worrying trends developing.

Note, for example, that the increase in unemployment is almost entirely a result of 33,000 or so job losses in the public sector. The hope has been that the private sector would pick up the slack, but not on this evidence: its headcount so far remains absolutely static. There is no immediate prospect of those losing public-sector jobs picking up gainful employment in the private sector.

Also, the employment figures continue to overstate the health of the labour market – they mask the fact that 1.16 million people have taken part-time work because they have been unable to find a full-time post. That figure is the highest since records began in 1992.

Then there is the disproportionate share of the pain being felt by women, whose participation in the workforce has begun falling. Given that women account for a higher proportion of public-sector employees than private, this is a theme that is likely to develop.

Finally, it is worth saying that even those who are fortunate enough to remain in work are going to find themselves worse off over the next 12 months. Annual pay inflation is now running at 2.3 per cent – well below this week's consumer price index reading of 3.3 per cent (let alone the 4.7 per cent at which inflation is running on the RPI measure, a moreaccurate reflection of most people's living costs).

The combination of rising inflation and rising unemployment is what we used to call stagflation. It's a word that is likely to make a comeback in 2011 because there is little prospect of much relief on either front.