CONFIDENTIAL
5.
The effect on employment. Mr Thompson has suggested that my view of the employment situation in the textiles and clothing industries might have been too rosy.
I had proposed that most of the unemployment that would 'be necessary' to cause the 1978 EEC exports to fall to the levels allowed by the EEC quotas had in fact already occurred in 1977 (due to the replete level of stock and continued low demand). Mr Thompson suggested that firms would not lay off workers to the full extent necessary until they were sure the depressed production would continue in the long run, and that the signing of the bilateral agreement with the EEC would give them the appropriate signal.
6. I thought this a good hypothesis and decided to look at any figures available- for recent months they exist only for the textiles industry. Manufacturing output, man-hours worked by operatives and employment peaked in the second quarter of 1976. A year later (June 1977) output had fallen by 19% (per quarter), the number of man-hours worked by 16% and the number of persons engaged by 15%. Thus I think we can safely say that falls in employment do not lag significantly behind falls in output and that most of the unemployment 'due' has in fact already occurred for the textiles industry at least.
G
7. All figures except those in the square brackets come from published sources of data and may be quoted freely.
Mark Hall
25 November 1977
Mark Hull
CONFIDENTIAL
Economists Department
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