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U.K. jobless claims rose more than economists forecast in February and a broader measure of unemployment remained at the highest rate in 16 years, underscoring the weakness of the labor market even as the economy shows some signs of recovery.
Unemployment-benefit claims climbed by 7,200 from January to 1.612 million, a 12th straight monthly increase, the Office for National Statistics said today in London. The median forecast of 28 economists in a Bloomberg News Survey was for a gain of 5,000. Unemployment (UKUEILOR) measured by International Labour Organization methods held at 8.4 percent in the three months through January, the highest since 1995.
The data may fuel arguments from opposition politicians that Prime Minister David Cameron is cutting government spending too fast to tackle the deficit and comes after the economy contracted in the fourth quarter. While some indicators signal the economy returned to growth this quarter, consumer confidence remains weak on concern that job cuts may continue.
The “labor-market figures paint a generally weak picture,” said Samuel Tombs, an economist at Capital Economics in London. “The recent pickup in economic growth seems to be insufficient to bring down unemployment.”
The pound pared its gain against the dollar after the report. It traded at $1.5703 as of 10:49 a.m. in London, little changed from yesterday. Gilts stayed lower, with the yield on the 10-year government bond up 10 basis points at 2.275 percent.
The increase in the number of people claiming jobless benefits last month put the claimant-count rate at 5 percent, unchanged from January. Claims rose by 7,000 in January instead of the 6,900 initially reported. In the three months through January, the number of unemployed rose 28,000 to 2.67 million people, the statistics office said. The number of people in work increased 9,000 to 29.1 million.
While surveys of manufacturing and services this month indicated that the U.K. economy returned to growth in the first quarter after a 0.2 percent contraction in the last three months of 2011, financial turmoil in the euro area has dented confidence in the U.K.
Lloyds Banking Group Plc (LLOY) and Royal Bank of Scotland Group Plc (RBS), Britain’s largest state-supported banks, will eliminate 2,064 jobs in the U.K. to control costs, the two lenders said in separate statements yesterday.
Still, some companies are hiring. Tesco Plc (TSCO) said on March 5 that it will add 20,000 U.K. jobs as part of a “substantial program” that will also see Britain’s biggest supermarket chain renovate hundreds of stores and open new locations over the next two years. Nissan Motor Co. plans to build a new model at its Sunderland, England, plant, adding about 2,000 jobs, including at suppliers, the Japanese carmaker said on March 6.
The government said there were “signs of encouragement” in today’s report, with private-sector jobs being created, vacancies rising and the level of unemployment increasing the least in almost a year.
“Any sign of improvement is welcome but we’re only just beginning to see some signs of stabilization,” Employment Minister Chris Grayling told BBC television.
Grayling said that “looking at the economic outlook now” he hoped the Office for Budget Responsibility will cut its for unemployment forecasts when it unveils new economic projections at the March 21 budget. In November, the fiscal watchdog predicted the ILO unemployment rate would peak at 8.7 percent this year, with jobless claims reaching 1.77 million in 2013.
The weakness in the labor market is damping wage pressures, according to today’s report. Total pay growth slowed to 1.4 percent in the three months through January from 1.9 percent in the fourth quarter of 2011, strengthening the Bank of England’s argument that above-target inflation isn’t fueling wage demands. The central bank maintained its target for bond purchases at 325 billion pounds ($510 billion) this month after increasing it by 50 billion pounds in February.
Weekly pay excluding bonuses slowed to 1.7 percent from 2 percent. In January, bonuses fell by 9.3 percent from a year earlier, the biggest drop since April 2010.
In a separate report, the statistics office said the number of public-sector workers fell 37,000 to 5.942 million in the fourth quarter, while private-sector employment grew 45,000 to 23.2 million. Chancellor of the Exchequer George Osborne is cutting spending and jobs to reduce a budget deficit equal to about 9 percent of gross domestic product.
Euro-area data today showed inflation in the 17-nation region stayed at 2.7 percent in February for a third month as European Central Bank turns its focus to increasing price threats. Industrial output rose 0.2 percent in January from the previous month, a separate report showed.
In China, Premier Wen Jiabao said that home prices remain far from a reasonable level and relaxing curbs could cause “chaos” in the market, indicating no imminent relaxation of cooling measures.
“We must not slacken our efforts in regulating the housing sector,” Wen said at a press conference in Beijing, according to an English translation. A bursting property bubble would hurt the entire economy, and the government wants “long-term steady and sound growth” in housing, he said.
Meanwhile, India reported today that wholesale-price inflation accelerated more than forecast last month to a 6.95 percent rate, from 6.55 percent in January.
In the U.S., a Labor Department report is forecast to show prices of imported goods rose in February for the third time in four months, while the Mortgage Bankers Association will release data for loan applications. The Commerce Department may say the U.S. current-account deficit widened in the fourth quarter to $115 billion, according to a separate survey of economists.
-- Editors: Fergal O’Brien, Andrew Atkinson
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