U.K. unemployment rose to a 17-year high in the three months through October as the euro-region debt turmoil threatened to push Britain back into recession.
Unemployment as measured by International Labour Organization standards rose by 128,000 to 2.64 million, the most since 1994, the Office for National Statistics said in London today. The jobless rate climbed to 8.3 percent from 7.9 percent between May and July. Jobless-benefit claims rose 3,000 to 1.6 million in November. Economists forecast an increase of 13,700, according to the median of 26 estimates in a Bloomberg News survey.
Companies are scaling backing hiring in response to a deteriorating outlook at a time when the government is shedding hundreds of thousands of jobs in an attempt to erase the budget deficit. Britain’s fiscal watchdog predicts unemployment will peak at 8.7 percent at the end of 2012 and Bank of England Chief Economist Spencer Dale said yesterday policy makers have scope to expand their 275 billion-pound ($427 billion) bond-buying program if growth stalls.
“The economy is probably flatlining or at best shrinking, and joblessness is going to increase,” said Alan Clarke, an economist at Scotia Capital Europe Ltd. “We see the bank increasing QE by 75 billion pounds in February and probably another 50 in May.”
The number of people in employment fell 63,000 in the three months through October to 29.1 million, the statistics office said. In the third quarter, public-sector employment fell 67,000 to 5.99 million, the lowest level since September 2003. Private sector employment rose 5,000 to 23.1 million.
The claimant count rate was unchanged at 5 percent in November, the statistics office said. In October, jobless-benefit claims increased 2,500 instead of the 5,300 initially estimated.
Chancellor of the Exchequer George Osborne announced a package of new measures to spur the economy last month after the Office for Budget Responsibility cut its growth forecast for this year and next to less than 1 percent as the euro-area debt crisis hits demand in the biggest market for British exports.
Opposition politicians say the downturn is being made worse by Osborne’s refusal to compromise on the pace of deficit reduction, which will see the wages of state workers all but frozen until 2015 and more than 700,000 of them lose their jobs.
Thomas Cook Group Plc, Europe’s second-largest tour operator, will eliminate hundreds of jobs when it closes about 200 U.K. shops and scales back its plane fleet as it seeks to rebound from an annual net loss of 521 million pounds.
Annual average-earnings growth in the three months through October slowed to 2 percent from 2.3 percent, the lowest since April. Excluding bonus payments, incomes growth accelerated to 1.8 percent from 1.7 percent.