'Slow recovery' for Scots jobs market, economists warn

The report said the jobs market is expected to remain weak

The jobs market in Scotland will not recover to previous levels until next decade, according to a downbeat assessment from economists.

The Item Club downgraded its forecast for growth next year, and warned the country may be facing "a lost decade".

The economists said Scotland had lost an "eye-watering" £40bn of output (£17,000 per household) since the downturn began.

They also said house prices were set to fall over the next three years.

The Item Club, backed by Ernst and Young, said this would result in houses losing a quarter of their value in real terms in the seven years to 2014.

The report uses the Treasury's economic model to assess the state of the economy.

In a report headlined Gasping for Oxygen, being published on Monday, it forecasts only "a grinding recovery", which it said would be weaker than the UK's.

It forecasts Scottish growth this year will come in at 0.6%, and next year's forecast has fallen from 1.9% to 1.1% as economic conditions and business confidence have worsened.

The analysis said Scottish output fell by 5.9% since the start of the downturn - less than the fall for the UK as a whole. But it had grown at only half the pace of the UK growth rate in the past two years.

As others across the world have warned in recent days, the report points out all that could become much worse if the eurozone crisis deteriorates. It said the impact could be "recession or worse".

Economist Dougie Adams said the country may be in the middle of "a lost decade", held back by much slower export growth than others.

He added that global trade growth since the start of the upturn had risen by a quarter. The UK's goods exports were up in that same period by 17%, but those from Scotland by only 7%.

The jobs market is expected to remain weak. With employment on track to fall next year, only sluggish recovery will follow, the Item Club said.

With the working age population on the rise, it said employment levels before the downturn would not be regained until at least 2020.

"Scotland's output at the mid-point of this year was around the same size as it was in early 2006," Mr Adams said.

"The economy could be expected to grow by 10% over five years in normal economic times, which suggests any talk of a 'lost decade' of growth is no longer as fanciful as it once sounded".

Mr Adams added that there were questions about the relevance of Scotland's existing skills and business base, because they tended to be in traditional markets, characterised by weak demand.