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U.K. Unemployment Claims Rise at Fastest Pace Since May 2009

U.K. Unemployment Claims Rise at Fastest Pace Since May 2009
A man checks employment vacancies in the window of a Reed employment agency in London, U.K. Photographer: Simon Dawson/Bloomberg

U.K. jobless claims rose at their fastest pace since May 2009 last month, a sign the recovery is struggling to generate enough jobs to offset the deepest government budget cuts since World War II.

Jobless benefit claims rose by 24,500 from May to 1.52 million, the highest level since March 2010, the Office for National Statistics said today in London. The median forecast of 21 economists in a Bloomberg News Survey was for a gain of 15,000. Unemployment measured by International Labour Organization methods fell by 26,000 to 2.45 million people in the quarter through May.

Prime Minister David Cameron is counting on private companies to keep creating jobs as his government eliminates more than 300,000 public-sector posts to tackle the budget deficit. Recent reports suggesting growth slowed in the second quarter have cast doubt on the outlook for the labor market.

“The underlying market picture is still quite weak,” Hetal Mehta, an economist at Daiwa Capital Markets Europe Ltd. in London, said before the data was released. “We still haven’t seen the vast majority of the public-sector job cuts come through. We will see unemployment rise and that will be a major factor for the Bank of England to keep policy on hold.”

The claimant-count rate was unchanged at 4.7 percent in June. Part of the June increase in the claimant count was due to rule changes affecting women as recipients of lone-parent benefits were moved onto the jobless roll, the statistics office said.

Job Losses

Cameron’s refusal to compromise on the pace of deficit-cutting is testing the economic recovery as high inflation erodes household incomes at the fastest pace since the 1970s.

The British economy probably grew just 0.1 percent in the second quarter, the National Institute for Economic and Social Research said last week. Bombardier, the world’s biggest trainmaker, said this month it will eliminate more than 1,400 jobs at a U.K. after it lost a government contract. Meanwhile, chocolate retailer Thorntons Plc and Carpetright Plc plan to close stores in response to a slump in consumer spending.

Based on ILO methods, the unemployment rate slipped to 7.7 percent in the three months through May from 7.8 percent in the period through February. That compares with 9.9 percent in the euro region, 9.2 percent in the U.S. and 4.5 percent in Japan, the statistics office said.

The drop in the ILO unemployment reflected a 42,000 decline in joblessness among people aged 16 to 24 as they left the labor force to join full-time education, the statistics office said.

Wage Growth

Claimant unemployment rose 22,500 in May rather than the 19,600 previously reported, the statistics office said.

Employment between March and May rose 50,000, taking the total of people in work to 29.3 million, the ONS said.

Annual wage growth excluding bonuses accelerated to 2.1 percent in the three months through May from 2 percent in the previous quarter, compared with a retail-price inflation rate of 5 percent. Salary increases including bonuses grew 2.3 percent, up from 2 percent.

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