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U.K. Unemployment Falls as London Olympics Boost Job Creation

Jobseekers sit and talk with recruiters during a recruitment day in London. Photographer: Simon Dawson/Bloomberg
Jobseekers sit and talk with recruiters during a recruitment day in London. Photographer: Simon Dawson/Bloomberg

Oct. 17 (Bloomberg) -- U.K. jobless claims unexpectedly fell in September and a wider measure of unemployment dropped to the lowest rate in more than a year as the London Olympics helped push employment to a record.

Jobless-benefit claims fell 4,000 from August to 1.57 million, the Office for National Statistics said today in London. The median of 27 estimates in a Bloomberg News Survey was for no change in claims. The jobless total measured by International Labor Organization methods declined to 7.9 percent, the lowest since the quarter through June 2011, from 8.1 percent. Employment surged 212,000 to 29.6 million, the highest since records began in 1971.

The figures provide a boost for Prime Minister David Cameron and deepen what the Bank of England and economists describe as a “productivity puzzle” as the economy continues to create jobs despite Britain’s return to recession at the end of last year.

“Even if growth is zero rather than negative it’s still surprising to see unemployment falling,” David Tinsley, an economist at BNP Paribas SA in London, said before the report was released. “I’d be surprised to see continued good news on employment front.”

ILO unemployment fell 50,000 to 2.53 million in the three months through August, the statistics office said. London accounted for almost half of the jobs created in the period, suggesting the Olympics provided an employment boost in the capital.

Productivity Puzzle

Jobless claims fell for a third straight month in September, leaving the rate at 4.8 percent. In August, claims fell 14,200 instead of the 15,000 originally reported.

Economists have struggled to explain the strength of the labor market at a time when the economy is shrinking. As a result, productivity has failed to recover as it did in the downturns of the early 1980s and early 1990s. Output per worker remains almost 4 percent below its pre-recession peak in early 2008, potentially limiting the economy’s scope to grow without pushing up inflation.

Possible explanations include an increase in self-employment and part-time work and the downward pressure on wages, which is helping companies to hold down labor costs. In an analysis published yesterday, the ONS rejected suggestions that the economy may be doing better than the official figures suggest, saying “implausibly large” revisions to gross domestic product would be needed to explain the productivity conundrum.

Incomes Squeeze

Average earnings grew 1.7 percent, little changed from the 1.6 percent in the previous period. Excluding bonuses, pay growth was 2 percent, the highest since December. That compares with inflation of 2.2 percent, and the squeeze on incomes may intensify after some of Britain’s biggest power companies announced price increases starting next month.

GDP shrank 0.4 percent in the three months through June, the third straight quarter of contraction, and the economy is on course to contract this year for the first time since 2009.

While a rebound is forecast in the third quarter after one-time disruptions in the prior three months, surveys suggest underlying growth is weak as companies across the services, manufacturing and construction industries cut jobs.

To contact the reporter on this story: Svenja O’Donnell in London at

To contact the editor responsible for this story: Craig Stirling at

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