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U.K. Unemployment Rate Drops From 16-Year High

U.K. Unemployment Rate Drops From 16-Year High

Unemployment rate in the U.K. dropped in the three months to February from a 16-year high, in a sign that the economy may be gradually recovering after a poor fourth quarter performance. Further, the number of persons seeking jobless benefits increased at a slower-than-expected pace in March.

The unemployment rate during the three months through February was 8.3 percent, the Office for National Statistics said, down from 8.4 percent in the January quarter, which was the highest rate in 16 years. Economists had forecast the rate to remain unchanged.

The number of unemployed persons fell by 35,000 from a quarter earlier to 2.65 million. It was the first quarterly fall in unemployment since the three months to May 2011, the statistical office said.

"The latest jobs data are relatively encouraging overall and supportive to hopes that the economy has returned to underlying modest growth," IHS Global Insight Chief Economist Howard Archer said.

Employment services provider Manpower said last month that the U.K. may return to job creation in the next quarter after a bleak midwinter as employers are now more positive about hiring than this quarter.

Today's data showed that the youth unemployment rate also eased from the record level seen in the previous three-month period. The unemployment rate fell 22.2 percent in December-February from a record high of 22.5 percent in the preceding quarter. The number of unemployed in the 16-24 age group fell to 1.033 million.

The claimant count in March was 1.61 million, up 3,600 on the previous month. It was the the smallest rise since December. Economists had expected an increase of 6,000. The claimant count rate was 4.9 percent, unchanged on the previous month. Economists were looking for an increase to 5 percent.

Total pay, including bonuses rose 1.1 percent annually during the period, down 0.2 points on the three months to January. Expectations were for an increase of 1.2 percent. The annual rate of increase in regular pay, excluding bonuses, was steady at 1.6 percent.

The employment rate rose marginally to 70.4 percent in the three months to February from 70.3 percent in three months to January. There were 29.17 million people in employment, up 53,000 on the quarter.

Though the number of part-time workers increased by 80,000 on the quarter, the number of full-time workers fell by 27,000 to reach 21.23 million.

This suggests that there is still a reluctance among employers to commit to taking on full-time workers in the current uncertain economic environment, Archer pointed out.

"Despite the improved overall tone of the latest labour market data, we still expect unemployment to head higher over the coming months as economic activity remains limited overall, business confidence is fragile and public sector jobs are pared," the economist added.

The economy contracted 0.3 percent in the fourth quarter. Spending has been weak and consumer confidence is low. Despite the overall weakness, the U.K. is expected to avoid a technical recession.

Yesterday, the International Monetary Fund raised the 2012 growth forecast for the U.K. to 0.8 percent.

by RTT Staff Writer

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