U.K. ILO Unemployment Rises in Sign of Slowing Labor Market

Photographer: Chris Ratcliffe/Bloomberg

A jobseeker enters a job centre in Folkestone. Close

A jobseeker enters a job centre in Folkestone.

Photographer: Chris Ratcliffe/Bloomberg

A jobseeker enters a job centre in Folkestone.

May 15 (Bloomberg) -- U.K. unemployment rose in the first quarter and the number of people in work fell the most in 1 1/2 years as the pressure on wages intensified, adding to signs that the labor market is slowing.

Joblessness as measured by International Labour Organisation methods rose 15,000 in the three months through March to 2.52 million, a rate of 7.8 percent, the Office for National Statistics said today in London. Employment fell by 43,000. Average earnings grew 0.4 percent, the least since 2009.

While the economy returned to growth in the first quarter, the recovery may be restrained by the government’s fiscal squeeze and weak demand in the euro area. The labor market, which proved resilient during the financial crisis, may be slow to pick up as companies meet demand from existing workers. The Bank of England is due to publish new growth forecasts today.

“What you are seeing is a slight deterioration in the employment data,” saidRoss Walker, chief U.K. economist at Royal Bank of Scotland Group Plc in London. “It’s not collapsing, but the underlying picture is weak.”

The pound stayed higher after the data and was trading at $1.5227 as of 10:04 a.m. in London, up 0.1 percent on the day.

Bonus Delays

A narrower measure of unemployment, jobless claims, fell 7,300 in April from March to 1.52 million, taking the rate to 4.5 percent, the least since April 2011. In March, claims dropped 9,900 instead of the 7,000 previously estimated. The ILO jobless rate of 7.8 percent compared with 7.9 percent in the three months through February. The number of unemployed has posted an increase for three consecutive quarters.

Underlining the pressure on household incomes, pay growth slowed to 0.4 percent in the first quarter, the least since September to November 2009, from 1 percent between December and February. In March alone, earnings fell 0.7 percent, the first monthly decline for four years.

Some of the slowdown is explained by delays to bonus payments as highly paid workers sought to take advantage of a cut in the top income-tax rate to 45 percent from 50 percent that took effect in April. Basic pay growth slowed to 0.8 percent from 1 percent.

Bank of England Governor Mervyn King will present the central bank’s quarterly Inflation Report, incorporating new projections for the economy, at a press conference at 10:30 a.m.

The challenges facing the British economy were underlined by separate statistics published today. The German economy expanded less than forecast in the first quarter and France slipped into recession.

IMF Forecasts

The International Monetary Fund cut its forecasts for the U.K. economy last month and said the government and the central bank should consider increasing stimulus to boost the recovery.

The IMF sees gross domestic product rising 0.7 percent this year before expanding 1.5 percent in 2014, according to its World Economic Outlook. It previously projected growth of 1 percent and 1.8 percent.

The fall in employment in the first quarter, the largest since July-September 2011, was driven by a 53,000 decline in part-time work with the number of people working full time rising 10,000, today’s report showed. Youth unemployment fell, while there was an increase in those out of work for more than a year.

To contact the reporters on this story: Gonzalo Vina in London at gvina@bloomberg.net; Fergal O’Brien in London at fobrien@bloomberg.net

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

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