Confused? Don't be; the latest unemployment figures are truly awful. We need a new economic strategy.

However, on just about every score the picture is deeply depressing. The number of vacancies dropped to a record low of 429,000 in the three months to June, down by 35,000 from the previous quarter. And the number of unemployed men increased by almost 200,000 to 1.46 million, with some 84,000 more women out of work, leaving female unemployment at 923,000.

LFS figures show that young people have been especially hit by the recession - these won't show up on the claimant count measure as they are not eligible for JSA.

Even if the current downturn is bottoming out - as some lead indicators suggest - unemployment is likely to carry on rising well into next year, with a number of analysts forecasting a rise to over 3 million.

Where will growth come from?

Looking forward, government expenditure after 2011 will be exceedingly tight, so this will not provide much of a driver for growth. Consumer expenditure may pick up but in all likelihood will not grow faster than the economy more generally as people 'deleverage' (reduce debts). This means that service sectors such as retailing will not underpin such a rapid rate of job creation in the near future.

Financial services will grow less quickly in the future, and it is worth remembering that the ongoing consolidation in the banking sectors will thin out branches and subsidiaries. Finally, property and construction will also take time to recover after the bursting of the bubble.

A key 'lesson' from the 'economic crisis is that the over-reliance on services - especially financial services and retail - helped contribute to a bubble economy which fuelled growth through unsustainable rising debt. In this context, an appreciation of the role that knowledge intensive manufacturing can play in the future is worth highlighting.

Yet various forecasts suggest that manufacturing output will shrink by as much as 9% this year as the twin effects of recession and credit crunch bite. In other words, UK PLC is in danger of wiping out just under 10% of the capacity that we know could drive growth even before we get going. This simply does not make economic sense and will damage the UK's long-term growth prospects.

Indeed, one bright spot on the horizon comes from the fact that sterling has seen a significant depreciation (down by over a quarter in trade weighted terms since its peak). That will provide a competitive boost for UK manufacturing and offers the possibility of the traded sectors being a key growth driver for the economy.

This is particularly relevant here for the West Midlands which could seize the opportunity to trade internationally once existing and new export markets pick up. There is a potential for the West Midlands to export its way out of recession in a way which few other UK regions can do.

More generally, the UK really does have strengths on which to build, such as knowledge intensive manufacturing, pharmaceuticals, export and business services, publishing, media and the creative industries. Green technologies will also be increasingly important.

When the economic crisis kicked off, Lord Mandelson spoke of the need for an "activist" approach to industrial policy, and the need to create an economy "with less financial engineering and more real engineering". Yet precious little has actually changed. Support for the auto industry for example has been limited and slow to arrive.

In the future we need to spend less and make more, and that requires having an industrial policy that supports modern, knowledge intensive manufacturing, including the auto sector. Such an approach could usefully include regional investment banks, better support for green technologies, use of procurement policies to stimulate new technologies and industries, tax breaks for green technologies and much more.

A few months ago Gordon Brown spoke about the need for a new industrial bank. We have heard precious little detail on this since. We need a proper debate on how the British economy will grow and what role there will be for industrial policy. Such a policy needs to build a broader base to the economy and stimulate jobs in new green industries. That's not about picking winners in 1970s style, but rather backing the growth industries of the future.

Just about every other 'advanced' country does this. Yet we still seem hung up on the industrial policy legacy of the Austin Allegro. Picking 'national champions' like British Leyland didn't work. No one is calling for that again. Can we move on please?

Professor David Bailey works at Coventry University Business School.