U.K. unemployment rose to the highest in 15 years in the three months through August, adding pressure on the government to loosen its fiscal squeeze as the economy struggles to avoid recession.
The jobless rate increased to 8.1 percent from 7.9 percent in the three months through July, the Office for National Statistics said in London today. The number of unemployed increased to 2.57 million, the most since 1994. In September, jobless claims rose for a seventh month.
Chancellor of the Exchequer George Osborne has pledged to maintain the biggest fiscal squeeze since World War II even as the outlook for the recovery deteriorates. Bank of England policy makers restarted their asset-buying program last week amid an escalating debt crisis in Europe and slowing global growth, a move Governor Mervyn King described as a response to what may be the worst financial crisis ever.
“This is obviously bad news for the U.K.,” Goldman Sachs Asset Management Chairman Jim O’Neill said in an interview with Maryam Nemazee on Bloomberg Television’s “The Pulse” program today. “If I were a policy maker, I’d be a little troubled.”
The number of people in employment fell 178,000 in the three months through August, the most since the quarter through July 2009, the statistics said.
The pound was little changed against the dollar after the report. It traded at $1.5682 as of 9:34 a.m. in London, from $1.5577 yesterday.
In September, jobless-benefit claims increased 17,500, the statistics office said. Economists had forecast an increase of 24,000, according to the median of 23 estimates in a Bloomberg News survey. The claimant count rate rose to 5 percent, the highest since January 2010, from 4.9 percent in August.
In the three months through August, youth unemployment increased to a 991,000, the highest since records began in 1992. The jobless rate in that category was 21.3 percent.
BAE Systems Plc said last month it will cut 3,000 jobs in the U.K. and end a century of aircraft manufacturing at a site in northern England as global defense cuts hit orders for its fighter jets.
O’Neill said the increase in unemployment may be because “the fiscal tightening that is coming home to roost.”
Ed Balls, the opposition Labour Party’s Treasury spokesman, will urge the government in a Parliamentary debate today to slow the pace of deficit reduction and boost growth by reinstating a tax on bank bonuses to fund homebuilding, bringing forward infrastructure spending, and offering a tax break for small firms taking on new staff. Osborne has said he will stick to his plan to eliminate the structural deficit by 2015, saying the program has earned Britain credibility with markets.
The National Institute of Economic and Social Research said yesterday the recovery is the weakest Britain has seen for almost a century, with output in the third quarter estimated to be 4 percent below its pre-recession peak in early 2008.
The economy has barely expanded over the past year as high inflation and low wage growth squeeze household budgets. The unemployment report today showed that annual growth in pay excluding bonuses slowed to 1.8 percent in the three months through August from 2.1 percent in the quarter through July. Including bonuses, wages rose 2.8 percent, lagging behind consumer-price growth that was at 4.5 percent in August.
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