On Monday the job axe fell at Hays Travel and DW Sports. On Tuesday it was the turn of Pizza Express and Currys PC World. On Wednesday it was WH Smith and M&Co delivering the grim news. A brutal shake-out of Britain’s labour market, caused by the deepest slump in three decades, has begun.

Unemployment will carry on rising as companies that have kept staff on thanks to the furlough scheme are now having to make a contribution to their employment costs. Wage subsidies will be history by October, even for those businesses that remain shut. With the benefits bill rising and tax receipts falling, a Conservative party that once accused Gordon Brown of maxing out on the nation’s credit card is on course to borrow upwards of £300bn this year, comfortably a peacetime record.

So what, it might be asked, has happened to the notion that “it’s the economy, stupid”? If things are so bad, why do opinion polls show that support for the Conservatives is holding up? Why is Labour not streets ahead?

Keir Starmer sketched out the accusations against the government in these pages on Wednesday. Ministers, the Labour leader said, had been too slow into lockdown, too slow on testing and too slow to get personal protective equipment to frontline staff. The government had ignored the warning signs flashing red on the economy’s dashboard and been too slow to change course to save jobs.

That’s a reasonably long charge sheet, which doesn’t even include the public outrage over Dominic Cummings deciding that lockdown restrictions were not for him. Labour’s ratings have improved under Starmer, yet despite everything, the average of recent polls suggests the Conservatives have a comfortable lead, which has actually widened since anger at Cummings has faded and the economy has started to open up.

One explanation is that there will be a lag between the economy’s arrival at a reality checkpoint and a plunge in the economy’s approval ratings. Furlough schemes, financial help for the self-employed, mortgage payment and business rates holidays, grants to small businesses, and the deferment of VAT payments have all helped to nullify the pain of an economic shock that wiped 25% off national output in March and April. Thanks to Rishi Sunak’s efforts Britain has spent the summer comfortably numb, but a long, hard winter looms ahead. The political landscape could look a lot different if the anniversary of the arrival of the pandemic early next year coincides with unemployment hitting 4 million, as is entirely possible.

Another explanation, linked to the first, is that many of the voters who backed Boris Johnson last December think the prime minister is doing his best – through liberal use of economic stimulus, a bigger budget for the NHS and higher infrastructure spending – to deliver on his manifesto promise to “level up” the country. Last month’s summer statement by the chancellor in which he announced temporary cuts in stamp duty and VAT, and said the Treasury would pay up to £10 a head towards the cost of eating out on certain days in August, may well extend the period when the government gets the benefit of the doubt. The mood will change, though, when Sunak decides – as he eventually will – that the party is over.

These explanations, alluring though they might be, would be more convincing if Labour’s defeat in 2019 was a one-off, but it wasn’t. There have been four elections since the start of 2010 and Labour hasn’t been remotely close to winning any of them. The first defeat was inevitable, given that Labour was in power during what was (up until then) the deepest recession of the postwar era; the other three were not. They took place against a backdrop of austerity and stagnant living standards: two things that in the past would have seen governments turfed out.

Yet at the end of a lost decade for the economy, Johnson won an 80-seat majority and Labour had its worst result since 1935. The party has a mountain to climb if it is to avoid losing for a fifth straight time, and it has to start by accepting that it is now a damaged brand.

Not everybody thinks so, obviously. Labour has a solid phalanx of devoted supporters who find it baffling that the Conservatives have managed to remain in power, and Starmer has a solid political base in London, the other big English cities and the university towns.

Elsewhere, though, the picture is pretty bleak. Much has been written about the demolition of Labour’s “red wall” in the Midlands and the north of England, but almost as worrying in 2019 was the performance of the party in the marginals of the south-east, places such as Crawley and Stevenage. Outside of London, Labour holds fewer than 20 seats south of a line drawn from the Severn estuary to the Wash.

The rot started to set in many years ago. It was a mistake for Labour to trash its own record when it was in power between 1997 and 2010, because that planted a seed of doubt about the party’s economic competence and allowed the Conservatives to claim that austerity had been forced on them by Brown’s profligacy.

Brexit didn’t help because it exposed the gulf between the better-off, university-educated, white-collar wing of the party and the more socially conservative blue-collar workers in struggling parts of the country. Jeremy Corbyn held the fragile coalition together in 2017, but it broke apart in 2019, when holding on to seats such as affluent Canterbury did not remotely compensate for losses in seats that had backed leave in the 2016 referendum.

This all came to a head in last autumn’s disastrous election campaign, in which the party came across as nasty, extreme and spendthrift – never a good combination. The spending promises that were sprayed around – free broadband, for example – merely accentuated a traditional doubt among a good many voters that Labour knew a lot more about how to spend money than how to make it.

The irony is that much of Labour’s 2019 offering was sensible and popular. Voters had no problem with the train-operating companies being nationalised, which they have been anyway as a result of Covid-19. They wanted more NHS spending and less austerity, both of which they have got.

In this respect, Starmer is better placed than was Neil Kinnock after Labour’s last really thumping defeat in 1983. Then, the party was swimming against a strong free-market tide. Today, the drift is towards a bigger state, higher taxes on the wealthy and the need to use activist economic policies to protect jobs. Starmer doesn’t need to ditch everything in Labour’s 2019 manifesto.

What he does need to do is win back the party’s reputation for competence. Voters might well accept Starmer’s case that the government is making a hash of things, but that’s not enough. He also has to convince them that life would not be even worse under Labour.

• Larry Elliott is the Guardian’s economics editor