U.K. unemployment rose at the fastest pace in more than a year and wage increases slowed, providing further evidence the labor market is succumbing to a weak economy.
Joblessness as measured by International Labour Organisation methods rose by 70,000 to 2.56 million in the three months through February, the most since November 2011, the Office for National Statistics said today in London. The unemployment rate climbed to 7.9 percent from 7.8 percent in the previous quarter. The median forecast of 27 economists in a Bloomberg News survey was for the rate to stay unchanged.
The figures are a blow to Prime Minister David Cameron, with the labor market previously providing a bright spot in an economy struggling with an austerity program, accelerating inflation and a crisis in Europe, Britain’s biggest trading partner. The number of people in work fell 2,000 in the latest quarter to 29.7 million, the first drop since October 2011.
“Today’s labor market data provided more evidence that the previous resilience of the jobs market is fading fast,” said Vicky Redwood, chief U.K. economist at Capital Economics Ltd. in London. “What’s more, the combination of a slowdown in regular pay growth and a drop in bonuses left overall average earnings unchanged on a year ago. More reason, then, to doubt that the pickup in consumer activity since the start of the year can be sustained.”
Bank of England Governor Mervyn King was defeated for a third month in a push for more stimulus, according to minutes of this month’s Monetary Policy Committee meeting, published by the central bank today. Six of the nine-member panel voted to keep the target for quantitative easing at 375 billion pounds ($575 billion). King, David Miles and Paul Fisher wanted to increase it by 25 billion pounds.
The pound extended its decline against the dollar after the report and was trading at $1.5303 as of 9:59 a.m. in London, down 0.4 percent on the day.
Unemployment claims fell 7,000 in March from February to 1.53 million. The median forecast of 27 economists in a Bloomberg survey was for no change. Underlining the pressure on household incomes, regular pay growth slowed to 1 percent, the least since records began in 2001, from 1.3 percent. Bonus payments fell, leading total pay growth to slow to 0.8 percent, the lowest since 2009.
A lackluster recovery is taking its toll on jobs. Axa SA, Europe’s second-largest insurer, plans to cut 450 jobs in the U.K. as it stops providing financial advice following a change in regulation.
Data next week will show whether Britain’s economy entered its first ever triple-dip recession in the first quarter after it contracted by 0.3 percent in the final three months of 2012.
The International Monetary Fund yesterday cut its forecasts for the U.K. economy and said the Bank of England should consider increasing stimulus to boost the recovery. It also said Chancellor of the Exchequer George Osborne should consider easing the pace of budget cuts.
The IMF sees gross domestic product rising 0.7 percent this year before expanding 1.5 percent in 2014, according to its World Economic Outlook.
Part-time jobs accounted for all of the decline in employment in the latest quarter, dropping 62,000 compared with a 60,000 increase in full-time work, today’s figures showed.
The unemployment total and rate reached its highest level since July last year. Youth unemployment increased and there was also a rise in the number of people out of work for longer than a year.