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U.K. Unemployment Hits 9-Month Low as Labor Market Defies Slump

U.K. Unemployment Hits 9-Month Low as Labor Market Defies Slump
A job seeker uses the phone to check for vacancies while at a job centre in London. Photographer: Chris Ratcliffe/Bloomberg

U.K. unemployment fell to a nine-month low in the quarter through May as the London Olympics helped to create jobs, underlining the resilience of the labor market in the face of a recession at home and Europe’s worsening debt crisis.

Unemployment based on International Labour Organization methods fell to 8.1 percent from 8.2 percent in the period through April, Office for National Statistics said today in London. Unemployment benefit claims rose 6,100 in June. The increase, though larger than the 5,000 median forecast in a Bloomberg News Survey, was boosted by a benefit-rule change that took effect May 21.

The strength of the labor market is providing a boost for Prime Minister David Cameron as his government axes hundreds of thousands of state jobs to help cut the budget deficit and struggles to lift the economy out of its second recession since 2009.

“Unemployment has been limited in recent months by an increase in people working part time, more people becoming self-employed and restrained earnings growth,” said Howard Archer, an economist at IHS Global Insight in London. “The big question is can the labour market remain resilient given the economy’s on-going weakness.”

The resilience suggests firms are hoarding workers, leaving scope for a renewed round of job shedding if the economy fails to improve. Another explanation, say economists, is that lost jobs are being replaced by new ones with lower levels of pay and productivity.

Jobless Rate

ILO unemployment fell 65,000 to 2.58 million in the three months through May. The 8.1 percent jobless rate compares with rates of 11.1 percent in the euro region, 8.2 percent in the U.S. and 4.4 percent in Japan.

It is also below the peaks reached after recessions in the early 1980s and early 1990s, when unemployment climbed above 10 percent.

The number of people in work climbed 181,000 to 29.4 million, the highest since September-November 2008, with full-time work accounting for most of the increase. Of the gain in employment, London accounted for 61,000.

The rise in the number of people claiming jobless benefits last month left the claimant-count rate at 4.9 percent. Claims rose 6,900 in May instead of the 8,100 rise initially reported. June was affected by a rule change that forced more lone parents to claim Jobseeker’s Allowance.

Today’s report showed that pay growth quickened to 1.5 percent in the three months through May from 1.4 percent. Excluding bonuses, pay growth was unchanged at 1.8 percent.

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