U.K. Jobless Claims Unexpectedly Rise as Euro Crisis Bites

U.K. unemployment claims unexpectedly rose in May, suggesting the labor market may be starting to succumb to Europe’s intensifying debt crisis.

Jobless-benefit claims climbed 8,100 from April to 1.6 million, the Office for National Statistics said today in London. The median forecast of 20 economists in a Bloomberg News survey was for a drop of 4,000. The unemployment rate as measured by International Labour Organization methods was unchanged at 8.2 percent in the three months though April.

“The claimant-count numbers tend to lead what happens in unemployment, so these numbers are a bit worrying,” said George Buckley, an economist at Deutsche Bank AG in London. “I wouldn’t be surprised if this is a response to the euro crisis. Employment may weaken -- that means potentially worse numbers on the public finances.”

The figures suggest the labor-market recovery is running out of steam, increasing pressure on Prime Minister David Cameron. His budget cuts have been blamed by the opposition Labour Party for pushing the U.K. into its first double-dip recession since the 1970s at a time when the euro-region crisis is casting a shadow on prospects for the economy.

Bank of England Governor Mervyn King and three other policy makers were overruled in a push to expand the bank’s bond-purchase program as a majority said more stimulus was likely to be needed as risks from the crisis mounted, minutes of the June 7 decision published today showed.

Pound, Bonds

The pound was little changed against the dollar at $1.5724 as of 9:58 a.m in London. The yield on the 10-year government bond was also unchanged at 1.719 percent.

The jobless-claims rate was unchanged at 4.9 percent in May. In April, jobless claims fell 12,800 rather than the previously estimated 13,700 drop. In the three months through April, ILO unemployment fell 51,000 to 2.62 million people.

Employment rose 166,000 to 29.3 million, the biggest increase since June-August 2010 with gains in full-time and part-time work.

Still, the number of people out of work for more than a year rose in the February-to April period and now stands at 34 percent of total unemployment. In addition, the number of people working part-time because they could not find a full-time job climbed 25,000 to 1.41 million over the period. There was also an increase in self-employment as people unable to find work turned to working for themselves.

In the first quarter, public-sector employment fell by 39,000 to 5.9 million, the lowest since March 2003, while employment in the private sector increased by 205,000 to 23.4 million, the statistics office said.

‘Black Cloud’

King last week unveiled measures to fight the escalating euro-area crisis as he warned of a “black cloud” from Europe that may hurt Britain’s economy.

The U.K.’s jobless rate compares with 8.2 percent in the U.S. and is well below the 11 percent in the euro region, where property busts in Spain and Ireland shattered the labor-intensive house-building industry.

It is also below the peaks reached after recessions in the early 1980s and early 1990s, when unemployment climbed above 10 percent. That suggests firms have hoarded workers, leaving scope for a renewed round of job shedding if the recovery proves weaker than anticipated.

Annual pay growth quickened to 1.4 percent in the three months through April from 0.9 percent in the three previous months, today’s figures showed. Pay growth less bonuses accelerated to 1.8 percent from 1.6. Inflation slowed to 2.8 percent in April, easing the squeeze on household budgets, data showed yesterday.

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