U.K. Unemployment Falls as Labor Market Remains Resilient
U.K. jobless claims unexpectedly fell in November and a wider measure of unemployment dropped the most in 11 years, underlining the resilience of the labor market in the face of a weak recovery.
Unemployment-benefit claims declined by 3,000 from October to 1.58 million, the Office for National Statistics said today in London. The median forecast of 25 economists in a Bloomberg News Survey was for a gain of 7,000. Unemployment measured by International Labour Organization methods dropped 82,000 to 2.51 million in the three months through October, the biggest drop since 2001. The jobless rate held at 7.8 percent.
The figures will provide a boost for Prime Minister David Cameron as the economy shows signs of cooling after emerging from a recession in the third quarter. Britain’s budget office said last week it expects unemployment to peak at 8.3 percent at the end of 2013 as it cut its forecasts for economic growth to reflect mounting risks from the euro area and the prospect of $607 billion in tax increases and spending cuts in the U.S. unless lawmakers strike a budget deal by year-end.
The labor data and improving consumer confidence offer “some hope that the domestic situation in the U.K. is stabilizing,” said James Knightley, an economist at ING Bank NV in London. “The main risks for the U.K. are currently external through the U.S. fiscal cliff and euro-zone worries, which the Bank of England can do little to offset.”
The pound stayed higher against the dollar after the report and was trading at $1.6144 as of 11:20 a.m. in London, up 0.2 percent on the day. The yield on the benchmark 10-year U.K. government bond rose 4 basis points to 1.84 percent.
The fall in the number of people claiming jobless benefits last month left the claimant-count rate at 4.8 percent. Claims rose 6,000 in October instead of the 10,100 increase initially reported.
Employment rose 40,000 during the quarter through October, taking the total of people in work to a record 29.6 million, the ONS said. Britain’s 7.8 percent unemployment rate compares with 11.7 percent in the euro region, 7.7 percent in the U.S. and 4.2 percent in Japan.
Today’s report showed that pay growth held at 1.8 percent in the three months through October, highlighting the squeeze on incomes with consumer-price inflation at 2.7 percent. Excluding bonuses, pay growth it slowed to 1.7 percent from 1.9 percent.
The OBR expects the government to eliminate almost a million jobs by 2018 to help narrow the budget deficit. Public- sector employment fell 24,000 in the third quarter to 5.75 million, the lowest since 2002. Employment in central and local government fell 19,000 to 5.27 million. Private-sector employment rose by 65,000 to 23.9 million.
Employment Minister Mark Hoban said that today’s figures demonstrate the resilience of the private sector, according to the Department for Work and Pensions Twitter feed. Even so, there’s “more work to be done,” and the government is “not complacent,” he said.
There were some signs of a slowdown in the labor market after a temporary boost from the London Olympics, with figures prepared on an experimental basis showing unemployment rose by 118,000 between September and October. The 40,000 increase in employment over the latest three months compares with a gain of about 100,000 in the previous period. In London, ILO unemployment rose by 5,000 between August and October.
Bank of England Chief Economist Spencer Dale still said today that inflation is likely to remain “sticky,” and he would have halted bond purchases even if the U.K. Treasury didn’t take income from gilts the central bank holds.
“In all likelihood I wouldn’t have voted for more QE even in the absence of the government’s decision,” Dale said in a speech in London. He also said while the coupon transfer doesn’t undermine the Monetary Policy Committee’s ability to set policy, there is a possible complication when those payments are reversed at some point in the future.
Britain’s economy probably barely grew in the three months through November and the recovery next year won’t be strong enough to lower the jobless rate, the National Institute of Economic and Social Research said on Dec. 7. That report followed data showing U.K. industrial production unexpectedly fell in October, a phenomenon echoed in euro region data.
Output in the 17-nation euro area dropped 1.4 percent from September, when it declined 2.3 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast no change in October, according to the median of 34 estimates in a Bloomberg News survey. Output fell 3.6 percent from the year-earlier month.
Meanwhile data from German showed a downward revision to the inflation reading for November, with a decline in the rate to 1.9 percent from 2.1 percent in October. The initial estimate on Nov. 28 had showed inflation at 2 percent.
In Asia, a government report showed South Korea’s jobless rate was 3 percent in November, unchanged from October at a low reached just five times since mid-1999. Japan’s machinery orders rose for the first time in three months, a sign companies may expect the world’s third largest economy to return to growth in 2013. In India, industrial production recovered to grow at the fastest pace in more than a year in October, and consumer prices increased to a three-month high in November.
The International Monetary Fund said in a report that Hong Kong is at risk of an abrupt decline in house prices after they doubled to a record in the past four years. In Australia, a survey showed consumer confidence slumped by the most in nine months on concern about the economic outlook and unemployment.
In the U.S., the Federal Open Market Committee concludes a two-day meeting to consider whether to increase record economic stimulus. The U.S. monthly budget deficit probably widened in November from a year earlier, according to a Bloomberg survey.
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