George Osborne hails UK growth figures - video

Growth boost puts Labour on back foot

PM and chancellor hail faster recovery as Ed Balls says life is getting harder for everyone except millionaires

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Growth of 0.6% may not look much, but it's a huge deal for George Osborne

George Osborne meeting Tesco distribution centre staff near Rugby the night before the release of GDP figures. Photograph: Stefan Rousseau/PA

When he was at the Treasury, Gordon Brown enjoyed waxing lyrical about Britain's growth record under Labour. The number of successive quarters of expansion had risen above 60 by the time Brown became prime minister, allowing him to trumpet the longest uninterrupted period of rising national output since the dawn of the industrial age.

Back then, news of a 0.6% quarterly increase in gross domestic product would have been neither here nor there. The economy grew by around 2.25%-2.5% on average for more than a century, or around 0.6% a quarter. In the City and at Westminster, Thursday's release from the Office for National Statistics would have been shrugged off as no big deal.

Times change, though. After the long expansion of 1992-2007, the economy plunged into recession in early 2008 and has yet fully to recover. Had it continued to grow at its average pace, national output would now be around 13% higher than it was before the downturn began; in fact it is still 3.3% lower even after the pick-up in the second quarter. In round numbers, the economy is £250bn smaller than it would have been had the recession never happened.

All of which makes Thursday's growth figure a very big deal indeed. George Osborne was in the Midlands on the night before the release of the GDP figures talking to workers in Britain's 24-hour economy because the chancellor knows that politics between now and the general election will be shaped by the argument over growth. Ed Balls knows that too, which is why the shadow chancellor was eager to point out that Britain's recovery was the slowest in a hundred years.

Osborne has not had an easy three years as chancellor. His plan for economic recovery is at least two years behind schedule and the idea of rebalancing growth towards exports and manufacturing has been quietly ditched in favour of the time-honoured remedy to weak activity: ramping up the housing market. Progress in reducing the budget deficit has stalled, and while unemployment has risen far less sharply than in the recessions of the 1980s and 1990s, workers have been forced to accept below-inflation pay increases or fewer hours to keep their jobs.

This matters politically. Governments that preside over periods when wages are growing more slowly than prices – Labour in the late 1970s for example – tend to lose elections. Those that are in power when living standards are rising – the Conservatives in the 1980s, Labour in the late 1990s and early 2000s – tend to get re-elected.

Even in times when growth has been strong and real incomes rising, no government since 1955 has been re-elected with an increased share of the vote, and David Cameron won only 36% in 2010. Little wonder then that the chancellor noted cautiously on Thursday that there was a long way to go.

But Osborne is not the only one with a headache. Labour has a far smaller lead in the opinion polls than it would need to feel comfortable about winning a general election in 2015, particularly in the context of a lost decade of living standards, austerity that will extend well into the next parliament and a recovery that is comfortably weaker than that which followed the Great Depression. Despite all that, voters have more faith in Osborne than Balls to run the economy, a testimony to the fragility of Labour's position.

When he became shadow chancellor, Balls faced three challenges: he had to make a convincing case that Labour was not single-handedly responsible for the slump of 2008-09 and the record peacetime deficit that resulted; he had to show that Osborne's austerity plan would hinder rather than hasten recovery; and he had to deliver an alternative to the coalition's strategy that would persuade voters it was worth giving Labour another try in 2015.

So far, his record is one out of three. Labour's warnings about the perils of austerity were borne out by two years in which the economy moved sideways. But the notion that Labour's profligacy in power threatened Britain with bankruptcy was well entrenched by the time Balls became shadow chancellor and has been hard to shift. Likewise, Labour's offer of austerity-lite after 2015 has not exactly caught the imagination of the public. There has been little to suggest so far that the opposition has the answers to Britain's long-term structural problems: the decline of manufacturing; the over-reliance on the City; the decades-long squeeze on wages that has encouraged debt-fuelled consumption.

Labour's position will be yet more difficult should the economic news remain even modestly good. Osborne wants to go into the next election with the following message: we inherited a right old mess from the last lot; that mess has taken us longer than we expected to clear up; we stuck to our plan when the opposition told us to change course; the benefits are now coming through; so don't hand power back to the people who screwed up in the first place. He doesn't need the economy to grow at 1% a quarter to construct this sort of political narrative: 0.6% or so a quarter will do fine.

The government's message will lack potency if the 2015 election approaches with real incomes still falling and fresh public spending cuts on the horizon. It will be blown out of the water if the economy stalls again between now and the election, something that currently looks unlikely but cannot be entirely ruled out. There will be a reckoning for the economy but that looks likely to be early in the next parliament when the Help to Buy support for the housing market is removed, interest rates start to rise and austerity continues for a sixth and seventh year rather than over the next 18 months.

In the meantime, Osborne, who looked like a dead man walking three months ago, is very much back in the game.

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Growth boost puts Labour on back foot

Link to video: George Osborne hails UK growth figures

David Cameron and George Osborne were handed a precious weapon against Labour's attacks on their economic policies on Thursday as it emerged that the recovery picked up pace between April and June.

Official figures showed the UK economy expanded by 0.6%, just months after some analysts predicted that the country was about to relapse into a new recession.

Mindful of the experience of the onetime Tory chancellor Norman Lamont, who spoke of the "green shoots of economic spring", Osborne used careful language about how the economy was now "on the mend".

But he was quick to claim the credit – and, in a direct challenge to his Labour shadow, Ed Balls, to insist that people up and down the country will soon share in the feelgood factor.

"Unlike the unbalanced economy before the crisis, we are going to make sure everyone benefits from this recovery," he said, after spending Wednesday night visiting shift workers in the Midlands. "Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend."

Balls, speaking from the United States, said stronger growth was "welcome and long overdue", but added that weak wage growth and above-target inflation meant living standards were still being squeezed. "While millionaires have been given a huge tax cut, for everyone else life is getting harder."

Ed Balls said stronger growth was 'welcome and long overdue', but added that living standards were still being squeezed. Photograph: Peter Macdiarmid/Getty Images

The 0.6% quarterly rate of growth in gross domestic product was twice the pace recorded in the first three months of 2013, and exactly as predicted by economists, after signs of a pickup in retail sales and upbeat readings in business surveys.

The chancellor's allies believe the first two consecutive quarters of growth since 2011 – across most economic sectors – will raise questions for Balls, who warned in 2010 that Osborne's deficit reduction plan was "the equivalent of ripping out the foundations of the house just as the hurricane is about to hit".

Matt Hancock, the chancellor's former chief of staff who is now a business minister, told the Guardian: "The biggest problem for Balls is he said we shouldn't stick to the course and we should borrow more and spend more. But that is exactly what got us into the mess in the first place."

Labour embarked on a change of tack in fiscal policy last month when Balls said he would have to accept the government's spending plans for 2015-16 outlined by Osborne on 26 June. But Hancock said: "Their fiscal policy is in a mess. They have lost the argument but kept the policy."

Balls made careful plans for the GDP announcement in the full knowledge that the chancellor would hail the figures. The shadow chancellor spent the day in Washington where he launched an inclusive growth commission with Larry Summers, the former US treasury secretary, which will look at how Britain can achieve US levels of growth at all levels of the economy.

The Office for National Statistics said that all sectors of the economy recorded growth in the second quarter of the year. Both industrial production and the key services sector expanded by 0.6%, the ONS said, with construction – which has been a heavy drag on the economy in recent quarters – picking up by a healthier than expected 0.9%.

Chris Williamson, chief economist at City data provider Markit, said: "Prospects look good for a continuation of the recovery in the third quarter, with consumers and businesses both helping drive the upturn. There are even signs that exporters will see improved sales, helping drive the long-awaited re-balancing of the economy."

John Longworth, director-general of the British Chambers of Commerce, said his members had become more optimistic in recent months. "Firms are feeling upbeat and are capable of expanding. More and more are adopting a 'have a go' attitude when it comes to exporting, which is really encouraging as this will go a long way to driving growth further still."

The Treasury hopes that with the eurozone crisis in remission, the economy is now poised for a more solid recovery, after almost three years of flatlining.

Analysts believe part of the explanation for the UK turnaround has been the chancellor's deliberate attempt to stimulate the housing market through the Funding for Lending scheme, which has brought down the cost of mortgages, and his controversial Help to Buy measures. Help to Buy is providing interest-free loans for buyers of newly built homes, and from January people buying properties worth up to £600,000 will be offered taxpayer-backed mortgage guarantees.

Alan Clarke, UK economist at Scotiabank, said: "Much of the turnaround in the growth outlook has coincided with signs of a marked improvement in the housing market, coupled with better than expected construction data. Both are thanks to the government's Help to Buy scheme." But many consumers were dipping into savings to fund their , and the recovery will only be sustained into 2014 if their renewed confidence feeds through to rising wagesThe early indications are that this is merely prompting consumption growth in excess of income growth. spending. "This can only persist for a finite period – we cannot borrow growth for ever."

Richard Lloyd, executive director of the consumer group Which?, said its surveys suggested many people were still struggling. "Today's confirmation of further growth is welcome but there is still a long way to go before this will be felt by consumers, whose confidence and spending power remains fragile," he said. "Households are increasingly using savings or credit to pay for essentials."

Despite the upturn, the economy has not recovered the output lost in the deep recession of 2008-09: the ONS said GDP was still 3.3% below its pre-crisis peak.

Thursday's relatively firm growth figure will guide the Bank of England's thinking, as it prepares to decide whether to deliver renewed stimulus to the economy in August.

The new governor, Mark Carney, favours giving growth an extra fillip through so-called "forward guidance", which reassures financial markets and consumers that interest rates will remain low for a prolonged period; but other members of the Bank's monetary policy committee are known to be more sceptical.

However, Simon Wells, chief UK economist at HSBC, said he believed the monetary policy committee would still want to give the recovery an extra nudge.

"Real wages are falling, firms aren't investing and non-oil exports aren't growing. So the BoE won't take any chances and we still expect more explicit forward guidance next month. Despite moving up a gear, we haven't yet reached escape velocity."

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UK GDP growth of 0.6% shows 'Britain is on the mend,' says George Osborne

Link to video: George Osborne hails UK growth figures

Britain's recovery picked up pace in the second quarter, official figures have confirmed, with GDP expanding by 0.6%.

George Osborne, the chancellor, welcomed the fresh evidence that the economy has moved, as he has put it, "out of intensive care".

"Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend," he said, "but there is still a long way to go and I know things are still tough for families. Unlike the unbalanced economy before the crisis, we are going to make sure that everyone benefits from this recovery."

Labour's shadow chancellor, Ed Balls, speaking from the US, said the stronger growth was "both welcome and long overdue" – but he stressed that for most families, living standards are still falling. "While millionaires have been given a huge tax cut, for everyone else life is getting harder with prices still rising much faster than wages." Balls added that the US economy has grown almost three times as fast as the UK's since mid-2010.

The 0.6% quarterly rate of growth was twice the pace of the first three months of 2013, and exactly as predicted by economists, after signs of a pickup in retail sales and strong readings in business surveys.

"The economy is coming out of the shadows, with a doubling in its quarterly growth rate from 0.3% in Q1 to 0.6% in Q2. The recovery is not quite on dry land yet, but at least it is a step in the right direction," said David Brown, of consultancy New View Economics.

The Office for National Statistics (ONS) said that all sectors of the economy recorded growth between April and June. Both industrial production, and the key services sector, expanded by 0.6%, the ONS said, with construction – which has been a heavy drag on the economy in recent quarters – picking up by a healthier than expected 0.9%.

Within services, which makes up almost 78% of economic output, the ONS said there was "widespread growth" with retail and hotels, transport and communications, and business and government services ,all showing an improvement.

John Longworth, director-general of the British Chambers of Commerce, said its members had become more optimistic in recent months. "Firms are feeling upbeat and are capable of expanding. More and more are adopting a 'have a go' attitude when it comes to exporting, which is really encouraging as this will go a long way to driving growth further still."

Measured at an annual rate, GDP was 1.4% higher than the same quarter a year ago, but the ONS stressed that the extra working day, after 2012 output was trimmed by the jubilee bank holiday, had flattered the calculation.

Despite the modest upturn, the economy still has not recovered the output that was lost during the deep recession of 2008-09: the ONS said GDP remains 3.3% below its pre-crisis peak.

The Treasury hopes that with the eurozone crisis in remission, the economy is now poised for a more solid recovery, after almost three years of flatlining. As recently as April, there were fears that after shrinking in the final quarter of 2012, the UK could have slipped into a renewed recession.

Chris Williamson, chief economist at City data provider Markit, said: "Prospects look good for a continuation of the recovery in the third quarter, with consumers and businesses both helping drive the upturn. There are even signs that exporters will see improved sales, helping drive the long-awaited re-balancing of the economy.

The relatively firm growth figure is also likely to influence the Bank of England's thinking, as it prepares to decide whether to deliver renewed stimulus to the economy in August. The new governor, Mark Carney, favours giving growth an extra fillip through so-called "forward guidance", which reassures financial markets and consumers that interest rates will remain low for a prolonged period; but other members of the Bank's monetary policy committee are known to be more sceptical.

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Ford Is Competing With Tech Firms To Fill New Jobs As Growth Accelerates - Forbes

Ford Motor Ford Motor said Tuesday it will hire 3,000 additional white-collar workers this year to meet surging demand for its vehicles — provided it can find them.

The carmaker boosted its 2013 hiring target by 36 percent from just six months ago, citing strong U.S. sales and aggressive global growth plans. That’s an extra 800 salaried positions.

But Ford says filling those jobs is proving harder than expected, partly because it needs people with different skills than in the past. Demand for mechanical engineers, for instance, has waned while the need for electronics engineers to work on embedded computer systems, software and electrification has grown. But those electronics experts are also in hot demand by other industries like IT and telecom.

Competition means finding the right people is a challenge, said Felicia Fields, Ford’s group vice president for human resources. “There are a number of companies back in growth mode so we have to work that much harder.”

It doesn’t help that the city of Detroit, just 10 miles away from Ford’s hometown of Dearborn, Mich., filed for bankruptcy last week, adding to the region’s image as an economic wasteland. But the carmaker is working more closely with state officials to promote southeastern Michigan’s advantages (low cost of living, abundant recreation and good schools, for example) to prospective employees.

To attract potential employees, Ford is launching a new social media recruiting campaign and is stepping up its college recruiting visits. At schools like Lawrence Technological University, near Detroit, Ford is also working with officials to develop a new embedded software controls program that could serve as a source of new talent.

Ford is about halfway to its goal goal of 3,000 new white-collar jobs and currently has more than 1,500 open positions for technical professionals in product development, manufacturing, quality, purchasing and information technology. Last year, Ford hired 1,850 salaried workers in the U.S.

The white collar hiring binge is in addition to blue collar jobs Ford is adding. Last April, for instance, Ford said it was hiring an additional 2,000 union workers in Kansas City to keep up with demand for its F-150 truck. Last year, Ford announced it would hire more than 6,200 hourly employees across the U.S. to increase capacity to meet demand for its new products. With these latest hourly announcements, Ford has reached 75 percent of its goal to create 12,000 hourly jobs in the U.S. by 2015.

“Our salaried hires are matching the growth we have seen on the hourly side,” says Fields. “Ford is very much in a job creation mode right now.”

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