UK jobless post biggest rise since 1992

The number of Britons claiming jobless benefits rose last month by the largest amount since 1992 and unemployment looks set to climb further in the coming months as the economy grinds to a standstill.

Yesterday's data showed a 21,000 jump in the claimant count after June's upwardly revised 20,000 rise.

The internationally comparable ILO measure showed the jobless total rose 60,000 in the three months to June, a much bigger increase than the 13,000 extra unemployed in the first three months of the year.

"We expect a further rise in unemployment as the economy enters recession," said Peter Newland, economist at Lehman Brothers.

With the Bank of England (BoE) forecasting growth will come to a halt for an entire year, some policymakers are becoming increasingly concerned that unemployment will rise sharply.

Monetary Policy Council (MPC) member David Blanchflower, who voted for a cut at the July meeting and almost certainly again last week, has argued that aggressive monetary easing is needed now to prevent the economy slipping into a prolonged recession.

There was little sign that higher inflation was feeding into higher wages - one of the MPC's biggest concerns.

Headline average earnings grew an annual 3.4 per cent in the three months to June, the weakest rise since August 2003 and below forecasts for an increase of 3.6 per cent. Headline inflation is running at 4.4 per cent.

Almost all the detail of the release pointed to a sharp deterioration in the jobs market.

Economists said things could get worse since the latest numbers take little account of new school-leavers who may be finding it increasingly hard to get a job as the economy slows.

The number of job vacancies in the three months to July fell by 47,400 from the previous three months. Redundancies in the three months to June rose 14,000 on the previous three months.

There was a big drop in the number of self-employed people in jobs but a rise in unpaid family workers.

Hours worked went down by 6.3 million in the three months to June even though there was an increase in the number of people in employment.

"It's fairly clear that the labour market is deteriorating at a rapid pace and I think it's going to continue to do so because of slower economic growth and concerns by companies that the downturn might actually be longer and more pronounced than originally thought," said George Buckley, economist at Deutsche Bank.

The BoE forecast yesterday that the economy would grind to a halt for the next year or so, which would push inflation to below the two per cent target in two years. That raised financial markets' expectations that interest rates could be cut before the end of the year.