Hooray! The recession is over. So how come Brendan Barber, TUC general secretary, told those gathered in Liverpool yerterday for the union movement’s annual congress that unemployment could be heading toward 4 million? It might simply be that Barber is a doom-monger who wants to scare Gordon Brown – who will himself address the TUC congress today – into ruling out wholesale cuts in public spending of the kind that are widely expected after the next general election. However, the TUC warning is not totally without foundation, as a CIPD analysis of the outlook for jobs, published yesterday, also suggests.

A starting point is that Britain’s flexible labour market has the potential to enable a more rapid fall in unemployment than experienced following the recessions of the 1980s and 1990s. By comparison with previous recoveries, the labour market exhibits fewer structural problems of the sort that in the past have triggered inflationary wage pressure before unemployment has been able to return to pre-recession levels. But unfortunately, in order to realise this potential the economy will need to sustain a strong recovery in demand for products and services, prospects for which remain highly uncertain.

The strength of demand from still heavily indebted consumers is set to remain subdued for some considerable time. The need to cut the government’s structural fiscal deficit will in turn require tax hikes and cuts in public spending that will curb demand still further. Recovery prospects thus depend much on the role of exports and business investment in driving forward the UK economy, but this itself will require a solid improvement in global economic conditions and, in particular, a robust return of business confidence.

I posit three possible scenarios for the jobs recovery:

A jobs-lined recovery: a strong and sustained rebound in global demand and investment enabling employers to take advantage of Britain’s flexible labour market to create jobs, resulting in a strong and early rise in employment and a return to the pre-recession rate of unemployment by the end of 2012;

A jobs-light recovery: a modest, sustained economic recovery sufficient only to enable a gradual increase in net job creation, with recruitment only slightly exceeding redundancies, continued high unemployment, and no prospect of a return to the pre-recession rate of unemployment before 2015 at the earliest;

A jobs-loss recovery: a weak and uncertain economic recovery, marked by continued fear of a double-dip recession, with cutbacks in recruitment, a renewed bout of redundancies as employers find it increasingly difficult to hold on to staff retained during the initial recession, unemployment continuing to rise well beyond 2010 to a peak of at least 3.5 million and no prospect of a return to the pre-recession rate of unemployment for at least a decade.

My current expectation is that the jobs-light recovery scenario most closely fits the likely outcome for the UK economy, while a jobs-lined recovery is least likely despite the underlying flexibility of the labour market. And while a jobs-loss recovery is not the most likely scenario it remains a distinct possibility, which means it is of vital importance that the government, the Bank of England, and their counterparts abroad, maintain expansionary fiscal and monetary policies for the time being. As a result, although Barber’s warning of 4 million jobless people is probably somewhat pessimistic, he is right to highlight the potential risk that the economy still faces.