Bloomberg News

U.K. Unemployment Claims Rise at Fastest Pace Since May 2009

July 13, 2011

(Updates with Labour Party comment in 14th paragraph.)

July 13 (Bloomberg) -- U.K. unemployment claims rose at their fastest pace since May 2009 last month, casting doubt on whether the economy is generating enough jobs to offset the deepest government budget cuts since World War II.

Jobless benefit claims rose by 24,500 from May to 1.52 million, the highest level since March 2010, the Office for National Statistics said today in London. The median forecast of 21 economists in a Bloomberg News Survey was for a gain of 15,000. Unemployment measured by International Labour Organization methods fell by 26,000 to 2.45 million people in the quarter through May.

Prime Minister David Cameron is counting on private companies to keep creating jobs as his government eliminates more than 300,000 public-sector posts to tackle the budget deficit. Today’s figures may provide ammunition for opposition politicians who say the pace of cuts is undermining the recovery.

“I’ve got unemployment to rise until the middle of next year, but not massively,” said Ross Walker, chief U.K. economist at Royal Bank of Scotland Group Plc in London. “The risks to growth are still to the downside and the Bank of England has migrated to a more dovish stance. What these numbers caution against is any knee-jerk reaction in policy.”

No Compromise

The pound pared gains against the dollar and was trading at $1.5963 as of 1 p.m. in London, up 0.3 percent on the day.

The claimant-count rate was unchanged at 4.7 percent in June. Part of the increase in jobless claims was due to rule changes affecting women as recipients of lone-parent benefits were moved onto the jobless roll, the statistics office said.

Cameron’s refusal to compromise on the pace of deficit- cutting is testing the economic recovery as high inflation erodes household incomes at the fastest pace since the 1970s.

The economy probably grew just 0.1 percent in the second quarter, the National Institute for Economic and Social Research said last week. Bombardier, the world’s biggest trainmaker, said this month it will eliminate more than 1,400 jobs at a U.K. after it lost a government contract. Meanwhile, chocolate retailer Thorntons Plc and Carpetright Plc plan to close stores in response to a slump in consumer spending.

Youth Unemployment

Based on ILO methods, the unemployment rate slipped to 7.7 percent in the three months through May from 7.8 percent in the period through February. That compares with 9.9 percent in the euro region, 9.2 percent in the U.S. and 4.5 percent in Japan, the statistics office said.

The drop in ILO unemployment reflected a 42,000 decline in joblessness among people aged 16 to 24 as they left the labor force to join full-time education, the statistics office said. In the latest month covered, ILO unemployment climbed by 22,000.

Claimant unemployment rose 22,500 in May rather than the 19,600 previously reported, the statistics office said.

Employment between March and May rose 50,000, taking the total of people in work to 29.3 million, the ONS said.

Still, the number of people working part time because they could not find a full-time job rose to a record high, economic inactivity rose by 32,000 to 9.3 million and job vacancies dropped by 38,000.

“The Tories are creating a vicious circle in our economy because they are cutting too far and too fast -- hitting families and costing jobs,” Liam Byrne, who speaks on work and pensions for the opposition Labour Party, said in a statement. “More people out of work and on benefits makes it harder to get the deficit down.”

Annual wage growth excluding bonuses accelerated to 2.1 percent in the three months through May from 2 percent in the previous quarter, compared with a retail-price inflation rate of 5 percent. Salary increases including bonuses grew 2.3 percent, up from 2 percent.

--With assistance from Harumi Ichikura and Mark Evans in London. Editor: Andrew Atkinson

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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