UK unemployment jumps raising fears over recovery

17th August 2011

Official figures released on Wednesday revealed that 2.49 million people were out of work on the government's preferred International Labour Organisation measure, the report adds.

The number of people claiming jobseeker's allowance also rose by 37,100, to 1.56 million in July.

The latest figures are likely to add to the growing concern among members of the Bank of England's interest rate setting committee which warned about the growing threat to the UK from the slowing global economy in the latest minutes from the last interest rate setting meeting, reports the Financial Times (paywall).

Schroders European Economist Azad Zangana comments: "Following the disappointing inflation data yesterday, today saw the release of latest labour market statistics which showed the ILO measure of unemployment rising to 7.9% in the 3 months to June – just shy of the 2.5 million mark.

"Within the details, net employment actually increased by 25,000 in the second quarter, but it was not enough to offset the rise in the working population, which meant that the number classified as unemployed increased by 38,000.

"With the rioting in England still in focus, there was some good news from the labour statistics. Although youth unemployment remains close to historic highs, unemployment for those aged 16-17 fell from 37.5% in the first three months of the year to 36.7% in the three months to June.

"Meanwhile, the claimant count, the alternative measure of unemployment, also increased in the latest set of numbers. The estimate for July showed an increase of 37,100 new claimants, taking the rate as a share of the 18+ population to 4.9% – a new recent high.

"There was some good news in the labour market release. Average weekly pay including bonuses increased at its fastest pace since April 2010, rising by 2.6% compared to a year earlier (3 month average). In addition, most of the increase was driven by the private sector rather than the public sector, reversing some of the imbalances seen in the past year.

"In particular, pay in both the construction sector and the wholesaling, retailing, hotels and restaurants sectors saw positive increases in pay, having up until now been reporting significant falls. It is however worth bearing in mind that with CPI inflation running at 4.4% as reported yesterday, almost every sector in the economy is seeing pay fall in real terms. "

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