Indicating the remarkable resilience of the U.K. labor market amid a severe recession, the number of Britons seeking jobless benefits unexpectedly declined in July, apparently due to a temporary boost from the Olympics.
Economists doubt the bounce would last long, even though self-employment and part-time jobs are partly keeping the unemployment down in the economy hit hard by recession and government's austerity measures.
The claimant count declined by 5,900 persons monthly to a three-month low of 1.59 million in July. Economists had expected the figure to climb by 6,000.
The measure was higher by 35,600 persons from a year ago. In June, the claimant count figure had risen by 1,000.
The claimant count rate was 4.9 percent during the month, unchanged from June. That was in line with economists' expectations. The rate is the highest since August last year and has been holding steady ever since.
The number of unemployed based on ILO measurements totaled 2.56 million in the June quarter, down 46,000 from the three months to March.
The ILO unemployment rate unexpectedly fell to 8 percent in the three months to June. Economists had forecast the figure to hold steady at 8.1 percent. The latest figure is the lowest since the same period last year, when it was at 7.9 percent.
"We suspect that unemployment is headed higher later this year and will rise further in 2013 as a consequence of extended soft economic activity, heightened business caution, and public-sector jobs being pared substantially," IHS Global Insight Economist Howard Archer said.
IHS Global Insight expects the number of unemployed to reach a peak of 2.80 million in 2013, taking the unemployment rate to 8.7 percent.
Meanwhile, employment rose by 201,000 to 29.48 million in the three months to June. That was the largest quarterly increase since the three months to July 2010 and the highest since the July quarter of 2008. Employment was lower by 96,000 from the pre-recession peak of 29.57 million recorded in the May quarter of 2008, the ONS said.
The outlook for the U.K. economy has turned increasingly bleak in the latest round of forecasts. The economy plunged deeper into recession in the second quarter with GDP falling 0.7 percent due to an extra public holiday and poor weather.
In its latest Inflation Report, the Bank of England said economic growth is likely to be around 2 percent in two years, down from the 2.6 percent expansion estimated in May.
Today's data showed that earnings grew less-than-expected in the three months to June. Average total pay including bonuses rose 1.6 percent year-on-year, slower than the 1.7 percent growth forecast by economists. Excluding earnings, the regular pay rose 1.8 percent from last year.
"Restrained pay growth is helping to keep unemployment down," IHS Global Insight's Archer noted.
"Low earnings growth is also maintaining a significant squeeze on consumers' purchasing power given that consumer price inflation currently stands at 2.6 percent".
by RTT Staff Writer
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