Bloomberg News

U.K. Jobless Claims Unexpectedly Rise on Crisis

June 20, 2012

U.K. Jobless Claims Unexpectedly Rise as Euro-Area Crisis Bites

Jobless-benefit claims climbed 8,100 from April, the Office for National Statistics said today in London. Photographer: Chris Ratcliffe/Bloomberg

U.K. jobless claims unexpectedly rose in May, suggesting the labor market may be starting to succumb to Europe’s intensifying debt crisis.

Jobless-benefit claims climbed 8,100 from April, the Office for National Statistics said today in London. The median forecast of 20 economists in a Bloomberg News survey was for a drop of 4,000. The unemployment rate as measured by International Labour Organization methods was unchanged at 8.2 percent.

“Looking ahead much depends on the euro zone crisis and the effect this exerts on the U.K. economy,” Philip Shaw, an economist at Investec Securities in London, said before the report. “The message is the economy is not growing, perhaps contracting.”

The figures suggest the labor-market recovery is running out of steam, increasing pressure on Prime Minister David Cameron. His budget cuts have been blamed by the opposition Labour Party for pushing the U.K. into its first double-dip recession since the 1970s at a time when the euro crisis is casting a shadow on prospects for the economy.

In the three months through April, ILO unemployment fell 51,000 to 2.62 million people. In April, jobless claims fell 12,800 rather than the previously estimated 13,700 drop.

Employment rose 166,000 to 29.3 million, the biggest increase since June-August 2010 with gains in full-time and part-time work.

In the first quarter, public sector employment fell by 39,000 to 5.9 million, while employment in the private sector increase by 205,000 to 23.4 million, the statistics office said.

Bank of England Governor Mervyn King last week unveiled measures to fight the escalating euro-area crisis as he warned of a “black cloud” from Europe that may hurt Britain’s economy.

The U.K.’s jobless rate compares with 8.2 percent in the U.S., though it is well below the 11 percent in the euro region, where property busts in Spain and Ireland shattered the labor- intensive house-building industry.

It is also below the peaks reached after recessions in the early 1980s and early 1990s, when unemployment climbed above 10 percent. That suggests firms have hoarded workers, leaving scope for a renewed round of job shedding if the recovery proves weaker than anticipated.

Annual pay growth quickened to 1.4 percent in the three months through April from 0.9 percent in the three previous months, today’s figures showed. Pay growth less bonuses accelerated to 1.8 percent from 1.6. Inflation slowed to 2.8 percent in April, data showed yesterday.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

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


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