U.K. Unemployment Unexpectedly Falls as Economy Gains Momentum

U.K. jobless claims rose less than economists forecast in March and a broader measure of unemployment fell for the first time for almost a year, signs that the labor market is stabilizing as the economy recovers.

Jobless-benefit claims rose by 3,600 from February to 1.61 million, the Office for National Statistics said today in London. The median forecast of 29 economists in a Bloomberg News survey was for a gain of 6,000. Unemployment as measured by International Labour Organization methods fell to 8.3 percent in the quarter through February from 8.4 percent.

The figures provide for a boost for Prime Minister David Cameron, who is facing criticism from the opposition Labour Party that he is damaging the recovery by trying to cut the budget deficit too quickly. Employment rose in latest period, suggesting hiring by private companies is making up for the loss of tens of thousands of public-sector jobs.

“Growth is on a rising trajectory,” said Alan Clarke, economist at Scotia Capital Europe Ltd. in London. “Things are looking less bad.”

The increase in the number of people claiming jobless benefits last month was the 17th in succession and the smallest since December. It left the claimant-count rate at 4.9 percent. In February, the claimant count rose 4,500 rather than the 7,200 initially reported.

In the three months through February, unemployment fell 35,000 to 2.65 million people. A third, 883,000, had been looking for work for more than a year.

That figure will rise to almost a million by year-end, the Institute for Public Policy Research said today in a report that describes long-term unemployment as “the hidden crisis of the slowest ever economic recovery in the U.K.”

Data suggest growth resumed growth in the first quarter, though Ernst & Young LLP’s ITEM Club predicted this week the economy will expand just 0.4 percent this year, half the pace seen by the Office for Budget Responsibility, which produces forecasts for the Treasury, and the International Monetary Fund.

Strains in the labor market remain. British clothing brand and retailer Aquascutum yesterday collapsed into administration, jeopardizing about 250 jobs. British Airways, the U.K. unit of International Consolidated Airlines Group SA, said on April 11 it plans to cut jobs at London Gatwick airport to respond to increasing competition from low-cost carriers.

Still, the government has argued that the labor market is showing signs of stabilizing, with companies including Tesco Plc and Nissan Motor Co. and GlaxoSmithKline Plc announcing plans to create thousands of jobs in recent weeks.

Today’s figures show the number of people in work climbed by 53,000 to 29.2 million between December and February.

Underlining the squeeze on household budgets, total pay growth slowed to 1.1 percent in the three months through February, the lowest since mid 2010, from 1.3 percent in the three months through January. Weekly pay excluding bonuses was unchanged at 1.6 percent.

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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