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Britons claiming unemployment benefits in January increased unexpectedly to the highest level in nearly thirteen years.
The number of people claiming Jobseeker's Allowance unexpectedly increased by 23,500 between December and January to reach 1.64 million, the highest figure since April 1997, data released by the Office for National Statistics showed Wednesday. Economists had forecast a fall of 10,000 for January. This monthly increase in the claimant count was preceded by two consecutive monthly falls. The claimant count rate remained at 5%, in line with economists' expectations.
The ILO unemployment rate for the period October to December was 7.8%, unchanged on the quarter. The number of unemployed people fell by 3,000 over the quarter to reach 2.46 million. The number of people unemployed for more than 12 months increased by 37,000 over the quarter to reach 663,000, the highest figure since the three months to September 1997, the statistical agency said.
The employment rate for October to December was 72.4%, down 0.1% on the quarter. The number of people in employment fell by 12,000 on the quarter to reach 28.91 million. There were 1.04 million employees and self-employed people working part-time because they could not find a full-time job. This is the highest figure since records for this series began in 1992.
Official figures showed that in the last quarter 2.8 million people were underemployed. Theresa May, the Shadow Secretary of State for Work and Pensions, said "Labour's failure to set out a credible plan for growth could leave people struggling to find work for years to come."
The British economy expanded just 0.1% sequentially in the fourth quarter of 2009, following the prior quarter's 0.2% contraction. The fourth quarter growth follows six quarters of contraction, which made it the longest recession since records began in 1955.
ING Bank NV economist James Knightley said the latest data should further help to dampen inflation pressures and allow the Bank of England to keep its extremely accommodative monetary policy in place through most of this year.
Elsewhere, the minutes issued by the Bank of England showed that all nine policy makers voted to pause the GBP 200 billion asset purchase programme in its February meeting. Also, the Monetary Policy Committee unanimously decided to hold the interest rate at a record low of 0.5%. Regarding the labor market, policy makers said, "Overall, the employment data remained more resilient than might have been expected given the scale of the decline in recorded GDP."
Average total pay including bonuses was GBP 451 per week in December. In the three months to December, total pay rose by a more than expected 0.8% from the previous year. Excluding bonuses, average regular pay was GBP 425 per week in December. In the three months to December, regular pay rose by 1.2% on a year earlier. Economists had expected earnings including bonuses to rise 0.9% and that excluding bonus to increase 1.1%.
Capital Economics economist Jonathan Loynes noted that one potentially more persistent influence on consumer price inflation is the rapid growth of unit wage costs. But this is unlikely to avoid inflation from falling back sharply over the next year or so.
Loynes holds the view that the threat of deflation has not evaporated. Further, he noted that it would be extremely unlikely that firms will pass higher wage costs in their selling prices in the current environment of weak activity and vast amounts of spare capacity.
Earlier in the day, the Trades Union Congress said it is concerned that the U.K. labor market is still very fragile. Also, the job statistics could be making the market look deceptively healthy, it warned. A closer look suggests that thousands of people are taking part-time or temporary jobs because they cannot secure full-time positions.
According to a recent survey by the Chartered Institute of Personnel and Development and KPMG, redundancies is set to almost double in the first quarter. The survey conducted among 700 public and private sector employers found that employers plan to cut around 6.2% of the workforce in the first quarter of 2010. Employers were planning to slash staff rather than hire, with particularly bleak outlook for the public sector in the coming quarter.
The Monster employment index for the U.K. that reflects online hiring activity had slipped to 111 in January from 120 in the previous month. Hospitality and tourism registered the largest decline in employment, while arts, entertainment, sports and leisure all registered increases.
At the same time, the latest Morgan McKinley survey found that job vacancies in London financial services sector increased 60% year-on-year in January. The number of new job vacancies rose to 4,646 from 2,898 in the previous year. Compared to December, it represented an increase of 105%.
Earlier in the week, the Centre for Economics and Business Research reportedly said the British jobless rate would be almost twice its current rate if the nation had joined the Euro. The think-tank said the economy would have contracted 7% and the unemployment rate would be around 15% last year.
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