Economics is caricatured as the dismal science. It is also a cynical science, as the stock market confirmed yesterday. Leading company share prices plunged in reaction to a sharper than expected fall in unemployment, news of which rekindled fears of a build-up of inflationary pressures in the economy. Low inflation tends to go hand in hand with high unemployment and the stock market jittered as the old saw about being in work, earning, and spending more came into play. We are not on the side of the cynics. We welcome the drop in joblessness, while recognising that a system must be found which accurately reports the real numbers out of work. This will cause a rise, at least in the short-term, in unemployment levels but the Government must not delay its commitment to ''unfudge'' the figures for political expediency.

Although inflation is creeping up, the Bank of England reported yesterday that the outlook was favourable. More people are in work, they have more to spend, money is cheap to borrow, inflation is still low, and, like the unemployment rate, is at a level which is the envy of our European competitors. To paraphrase Harold Macmillan, it is a long time since we had it so good. This is an unfortunate paradox for the Conservatives, who will argue that it was their policies under John Major which were responsible for the new ''golden age'', 35 years on from Macmillan's. But that is only part of the story, as is dreamy talk of a golden age. We are reminded of John Redwood's observations during the Tory party leadership campaign to the effect that the Conservatives lost the General Election largely because they had lost touch with the voter. Mr Major's Government had failed to pick up on household

worries, among them job insecurity.

Under Labour people still fret, not just about whether they will be earning the same amount rather than less in six months, but whether they will be in a job at all. That fear alone must temper this talk of a golden age. The sense of insecurity spreads beyond employment, although it is frequently linked to it. The new message might not be ''fend for yourself'' but it leaves us in no doubt that the state will not, cannot, provide. Families hear it when they come to make arrangements for elderly relatives who can no longer care for themselves. They hear it when they consider the cost of higher education for their children. Their children hear it when they start work (frequently on short-term contracts) and have to think from the outset about making their own pension plans. We do not wish to be party poopers but it is a curious, if unwelcome, fact that people do not feel that they are living

in an age of great happiness, prosperity, and comfort.