U.K. Unemployment Jumped the Most Since 1992 in June
By Svenja O'Donnell
July 16 (Bloomberg) -- U.K. unemployment jumped the most in June since the aftermath of the last recession in 1992 as the economic slowdown forced housebuilders and banks to cut jobs and stop hiring.
Claims for jobless benefits climbed for a fifth month, increasing 15,500 from May, the Office for National Statistics said today in London. Economists predicted 10,000, the median of 29 forecasts in a Bloomberg News survey shows. The unemployment rate on that basis was 2.6 percent.
The economy and labor market face ``consequences'' as the Bank of England fights to bring accelerating inflation under control, policy maker Andrew Sentance says. Rising unemployment may exacerbate Prime Minister Gordon Brown's woes after the worst housing market slump since the last recession helped push his party's support close to the lowest since World War II.
``This is clear evidence the labor market is softening,'' said Stewart Robertson, an economist at Morley Fund Management in London, which oversees about $310 billion in assets. ``If we're right on our mild recession call, then the unemployment rate will keep going up.''
The pound fell as much as 0.2 percent against the dollar after the data and traded at $2.0033 as of 12:50 p.m. in London. U.K. government bonds stayed higher, pushing the yield on the two- year gilt down 3 basis points to 4.809 percent.
Unemployment, based on International Labour Organization standards, was 5.2 percent in the three months through May. That compares with 7.2 percent in the euro region, 5.5 percent in the U.S. and 4 percent in Japan, the statistics office said.
Job Cuts
Homebuilders announced more than 4,000 job cuts since the start of July, with Redrow Plc and Bovis Homes Group Plc each saying they will slash their workforces by 40 percent. HBOS Plc, the U.K.'s biggest mortgage lender, said last week that house prices fell in June from a year earlier by the most since 1992.
The collapse of the U.S. subprime mortgage market has cost financial institutions worldwide more than $416 billion in losses and writedowns and led them to shed almost 94,000 staff. Barclays Plc, the U.K.'s fourth-biggest bank, said July 8 it cut about 300 jobs because customer demand is drying up.
U.K. jobless benefit claims rose by the most since December 1992 to 840,100 in June, the highest level in 10 months, the statistics office said.
Next Election
The total may reach 1.3 million by the middle of 2010, the deadline for Brown to call the next election, according to a July 7 forecast by the Centre for Economic and Social Inclusion, a research group supported by the government. The government noted that the number of people with jobs is at a record.
``Employment continues to grow,'' said Stephen Timms, the Labour government's minister for employment. ``The rise in the claimant count is a concern but needs to be seen in context. The number of people on jobseeker's allowance is lower than a year ago and just over half its 1997 level.''
A YouGov Plc poll of 1,800 people showed 46 percent of them predict a recession in the next 12 months, the Sunday Times said on July 13. It also showed the opposition Conservatives have kept their 22 percentage point lead over Brown's ruling Labour Party.
While Lehman Brothers Holdings Inc. says the economy may now be contracting, the Bank of England has been unable to cut the benchmark interest rates from the current 5 percent as policy makers battle to control consumer prices. Inflation accelerated to 3.8 percent in June, the most in at least 11 years, the statistics office said yesterday.
Spending Squeeze
Inflation ``will take time'' to get under control, Sentance said yesterday. ``That will require a squeeze on spending and incomes in the U.K. and other economies, with consequences for economic growth and employment in the short term.''
Central bank Governor Mervyn King said this week that policy makers ``cannot take for granted'' that inflation expectations will stay anchored. Policy makers have said they are watching wage negotiations for signs that they could become dislodged.
Average earnings, excluding bonuses, rose an annual 3.8 percent in the three months through May, compared with 3.9 percent in the quarter through April, the statistics office said. Including bonuses, the figures were exactly the same.
Today's report ``points to further headwinds ahead for the consumer, on top of soaring food and energy prices and the holes that are being blown into household balance sheets by falling house and equity prices,'' said Nick Kounis, an economist at Fortis Bank. The central bank, he said, ``will not be able to respond to the downturn in the economy any time soon.''
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net. Last Updated: July 16, 2008 07:52 EDT
July 16 (Bloomberg) -- U.K. unemployment jumped the most in June since the aftermath of the last recession in 1992 as the economic slowdown forced housebuilders and banks to cut jobs and stop hiring.
Claims for jobless benefits climbed for a fifth month, increasing 15,500 from May, the Office for National Statistics said today in London. Economists predicted 10,000, the median of 29 forecasts in a Bloomberg News survey shows. The unemployment rate on that basis was 2.6 percent.
The economy and labor market face ``consequences'' as the Bank of England fights to bring accelerating inflation under control, policy maker Andrew Sentance says. Rising unemployment may exacerbate Prime Minister Gordon Brown's woes after the worst housing market slump since the last recession helped push his party's support close to the lowest since World War II.
``This is clear evidence the labor market is softening,'' said Stewart Robertson, an economist at Morley Fund Management in London, which oversees about $310 billion in assets. ``If we're right on our mild recession call, then the unemployment rate will keep going up.''
The pound fell as much as 0.2 percent against the dollar after the data and traded at $2.0033 as of 12:50 p.m. in London. U.K. government bonds stayed higher, pushing the yield on the two- year gilt down 3 basis points to 4.809 percent.
Unemployment, based on International Labour Organization standards, was 5.2 percent in the three months through May. That compares with 7.2 percent in the euro region, 5.5 percent in the U.S. and 4 percent in Japan, the statistics office said.
Job Cuts
Homebuilders announced more than 4,000 job cuts since the start of July, with Redrow Plc and Bovis Homes Group Plc each saying they will slash their workforces by 40 percent. HBOS Plc, the U.K.'s biggest mortgage lender, said last week that house prices fell in June from a year earlier by the most since 1992.
The collapse of the U.S. subprime mortgage market has cost financial institutions worldwide more than $416 billion in losses and writedowns and led them to shed almost 94,000 staff. Barclays Plc, the U.K.'s fourth-biggest bank, said July 8 it cut about 300 jobs because customer demand is drying up.
U.K. jobless benefit claims rose by the most since December 1992 to 840,100 in June, the highest level in 10 months, the statistics office said.
Next Election
The total may reach 1.3 million by the middle of 2010, the deadline for Brown to call the next election, according to a July 7 forecast by the Centre for Economic and Social Inclusion, a research group supported by the government. The government noted that the number of people with jobs is at a record.
``Employment continues to grow,'' said Stephen Timms, the Labour government's minister for employment. ``The rise in the claimant count is a concern but needs to be seen in context. The number of people on jobseeker's allowance is lower than a year ago and just over half its 1997 level.''
A YouGov Plc poll of 1,800 people showed 46 percent of them predict a recession in the next 12 months, the Sunday Times said on July 13. It also showed the opposition Conservatives have kept their 22 percentage point lead over Brown's ruling Labour Party.
While Lehman Brothers Holdings Inc. says the economy may now be contracting, the Bank of England has been unable to cut the benchmark interest rates from the current 5 percent as policy makers battle to control consumer prices. Inflation accelerated to 3.8 percent in June, the most in at least 11 years, the statistics office said yesterday.
Spending Squeeze
Inflation ``will take time'' to get under control, Sentance said yesterday. ``That will require a squeeze on spending and incomes in the U.K. and other economies, with consequences for economic growth and employment in the short term.''
Central bank Governor Mervyn King said this week that policy makers ``cannot take for granted'' that inflation expectations will stay anchored. Policy makers have said they are watching wage negotiations for signs that they could become dislodged.
Average earnings, excluding bonuses, rose an annual 3.8 percent in the three months through May, compared with 3.9 percent in the quarter through April, the statistics office said. Including bonuses, the figures were exactly the same.
Today's report ``points to further headwinds ahead for the consumer, on top of soaring food and energy prices and the holes that are being blown into household balance sheets by falling house and equity prices,'' said Nick Kounis, an economist at Fortis Bank. The central bank, he said, ``will not be able to respond to the downturn in the economy any time soon.''
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net. Last Updated: July 16, 2008 07:52 EDT
Labels: unemployment, United Kingdom
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