U.K. Jobless Rises Less Than Forecast

U.K. unemployment rose at the slowest pace in 18 months in October, bolstering government claims that efforts to lift the economy out of recession are working.
TradingEconomics.com, Bloomberg 11/11/2009 9:16:03 AM

Claims for jobless benefits increased by 12,900, the least since April 2008, the Office for National Statistics said in London today. The number of people seeking work in the three months through September rose 30,000, the smallest gain since the period through May 2008.

Prime Minister Gordon Brown is counting on an economic revival to narrow the Conservative lead over his Labour Party before a general election due by June 2010. Economists expect unemployment to keep rising long after the economy returns to growth, casting doubt over the strength of the recovery.

The number of people in work rose by 6,000 in the three months through September, the first increase since May-July 2008, the statistics office said.

The economy unexpectedly shrank for a sixth quarter in the three months through September, making the recession the longest on record, and Bank of England policy makers last week extended their bond-buying program by 25 billion pounds to 200 billion pounds. Central bank officials say the recovery may be muted as fears about job security and the prospect of tax increases to curb the budget deficit prompt consumers to save rather than spend.

Presenting the bank’s quarterly inflation outlook today, Governor Mervyn King said it will take a long time to recover the output lost during the slump and that this will keep prices in check.

Britain has lost more than 600,000 jobs since the recession began, taking the unemployment rate to 7.8 percent, or 2.46 million people, in the three months through September. That compares with 10.2 percent in the U.S. in October, 9.7 percent in the 16-nation euro region in September and 5.3 percent in Japan. A fifth of people age 16 to 24 are without work in the U.K.

Claimant unemployment has risen for 20 consecutive months and stood at 1.64 million in October, the highest level since 1997. In September, the number of claims rose 20,600 instead of the 20,800 previously reported.

While services, manufacturing and house prices are showing signs of recovery, companies are still cutting staff to curb costs.

This month alone, Lloyds Banking Group Plc, HSBC Holdings Plc and Royal Bank of Scotland Group Plc have announced plans to ax a combined 10,400 jobs. BAE Systems Plc’s Land Systems unit will cut 500 jobs in the U.K., the Unite union said on Oct 29.

Some companies have spared jobs by cutting or freezing pay and shortening working hours. Many economists expect unemployment to peak below 10 percent, compared with almost 12 percent reached in the aftermath of the early 1980s recession.

Average earnings excluding bonuses grew an annual 1.8 percent in the quarter through September, the least since records began in 2001, the statistics office said. Including bonuses, they increased by 1.2 percent.

U.K. Jobless Rises Less Than Forecast