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UK Unemployment: Largest quarterly increase since 1971

In the three months to May 2009 the number of unemployed people increased by 281,000 over the quarter and by 753,000 over the year, to reach 2.38 million. According to the Office for National Statistics which published these figures this morning, this is the largest quarterly increase in the number of unemployed people since comparable records began in 1971.


The unemployment rate was 7.6% for the three months to May, which was up 0.9% over the previous quarter and up 2.4% over the past year. This represents the largest quarterly increase in the unemployment rate since 1981.


The recent trend can be seen in the figure below.

Source: ONS

Source: ONS


Although these figures are extremely serious and look likely to continue to grow over the next few months, the UK is comparatively better off than some other major economies. For example, the US saw an additional 467,000 jobs lost in June and has an unemployment rate of 9.5%. Also, by comparison, the Euro area had an unemployment rate of 9.5% in May and the in the same month the OECD average rate for member states was 8.3%.


The UK claimant count, which measures the number of people claiming Jobseeker’s Allowance, reached 1.56 million in June, which is the highest figure since June 1997. The count has increased by 23,800 in the month since May and is up 716,800 over the past twelve months. One possible ‘green shoot’ is that this monthly increase is the lowest since May 2008 but it will have to be substantiated by increasingly smaller rises over subsequent months before we can get too excited.


Other figures show that the employment rate for people of working age was 72.9% for the three months to May 2009 which was a drop of 0.9 percentage points from the previous quarter and down 2.0 on the year. This is the largest quarterly fall in the working age employment rate since comparable records began in 1971. The total number of people in employment for the three months to May 2009 was just under 29 million, which was 269,000 down over the quarter and 543,000 less than a year ago.


Average earnings including bonuses rose by 2.3% in the year to May 2009, which compares to an April rate of only 0.9%. This shows that there are still bonuses being paid in some sectors of the economy to cause such a sharp increase. When these are factored out, average earnings excluding bonuses fell to 2.6% from the April rate of 2.7%, reflecting the pressure on labour markets, with some high profile companies instituting wage freezes and even wage cuts. What is particularly intriguing is that May pay growth including bonuses in the private sector stood at 1.9% in May compared with 3.5% in the public sector. Whichever government wins the next election will have to tackle head-on both the inexorable rise in public sector pay and the level of secured pensions which most private sector employees can only dream about.


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Posted in Earnings, Employment, unemployment

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