Unemployment, and that 'Plan B'
For some time, the UK labour market has been "Exhibit A" in the government's defence of its budget cuts. When anyone questioned whether the economy could absorb an estimated 330,000 in public-sector job losses, ministers would point out that an extra 350,000 jobs had been created in Britain since April.
Today's figures show employment falling by 33,000 over the three months to October. That was largely due to a falling public-sector job count: the private sector workforce remained broadly unchanged. The broad, ILO measure of unemployment went up, for the first time since April.
You can see shift in momentum, from public to private sector, in the divergent fortunes of men and women. In the year to October, the number of men out of work has fallen by 71,000, but joblessness among women has risen by 89,000. That is an increase of more than 9%.
The figures are disappointing, but - to repeat the point - the bigger surprise would have been if we had seen another massive rise in the number of jobs, at a time when many employers still have doubts about the future of the recovery. Even with the new data, employment has risen by 264,000 since the start of the year.
For those who worry about the government's tough approach to the budget deficit, these figures will underscore the need for a "Plan B" - something that has been much discussed in Westminster in the past 24 hours. Supposedly, the Cabinet Secretary, Gus O'Donnell, has drafted a memo outlining what could be done if the economy got knocked off track [subscription required].
On Tuesday's Ten O'Clock news, the shadow chancellor, Alan Johnson, said the existence of the memo showed that the government was getting "very nervous"... that its"huge gamble" on the economy was not going to pay off.
With all respect to Mr Johnson, I don't think most economists would see it that way. But perhaps it depends on what you mean by a plan B.
In political terms, "Plan B" is shorthand for "rethinking budget cuts because the economy is tanking". In the past day I have talked to a range of senior officials about the cabinet secretary's memo, including some who have been nervous about the scale of the government's budget cuts. None considered the memo to be that kind of plan B.
The paper is a description of the options that would available to the authorities, in the event of a major shock. The big shock that everyone serious is worried about in the first part of the year is not a sudden weakening of the UK economy, per se, but a sudden drying up of bank funding in the UK and across Europe, either as a result of the ongoing crisis in the eurozone, or worries about US banks related to the still declining US housing market.
That is why the emphasis, in the memo, is on possible ways to lend directly to the corporate sector - either through bigger Bank purchases of corporate bonds, or through some form of direct lending programme to British companies, financed by the Bank but underwritten by the Treasury. In such circumstances, you would be thinking about how to keep the corporate sector growing without the help of banks.
How should fiscal policy respond? The official answer has long been that "the automatic stabilisers would be permitted to operate". In other words, if the economy weakened, borrowing would rise automatically, as a result of higher social-security spending and weaker tax revenues. The government would not seek to offset that with cuts elsewhere. Since the government's deficit target is the cyclically adjusted figure for borrowing, that would not technically require any change in the government's strategy at all.
In other words - the government would say that none of this is plan B. It is plan A, subclause (b).
At which point, you might think this is all getting rather silly. And you would be right. But there is a serious distinction here, important to both sides.
Allowing the automatic stabilisers to operate means spending money on things you'd rather not spend money on, because the economy is not as strong as you had hoped. That, for Labour, is the big downside of the government's approach. If you are going to end up having to borrow the money anyway, they would say, isn't it better to spend it on valuable things like roads and education - than to cut those programmes, but end up spending more on unemployment benefit instead?
That, in a nutshell, is the Labour argument on this entire issue. But the government has a response, which is equally central to their way of looking at the world.
George Osborne would say that it is a false choice, because the government would only be able to let the automatic stabilisers operate (ie to let borrowing go up again in response to a shock) because of the credibility it has built up since May.
If Labour had stayed in power, and stuck with its spending plans, Mr Osborne likes to say that Britain would now be on the same list, in the financial markets, as Portugal, Spain and the rest. That might be an exaggeration. But we would probably have less room for manoeuvre, in the face of another downturn.
Of course, if you're on Labour's side you might say the cuts themselves have made a downturn more likely. But arguably, the state of the world economy - and global financial markets - will play a larger role in Britain's recovery than the government's tough spending plans. (After all, they would have been fairly tough under Labour as well).
That is probably the key change in this debate, relative to six months ago. There is still plenty to worry about. But the gravest risks hanging over the recovery these days look more foreign than domestic. It will be interesting to see how long that lasts.