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UK unemployment increases again

More bad news! Unemployment has risen, following on from yesterday’s rise in prices. Unemployment rose by 44,000 to reach almost 2.5 million in the three months to the end of December, according to statistics published by the Office for National Statistics earlier today. This gave an unemployment rate of 7.9%, which was up 0.1% on the quarter.

The unemployment rate for young people aged between 16 and 24 increased by 1.5% on the quarter to reach 20.5%. This is the highest figure since comparable records began in 1992. It reflects an additional 66,000 young people out of work in the last quarter, to reach a total of 965,000. Nearly one million young people out of work and the situation is getting worse rather than better. When more public sector workers lose their jobs this year they will be competing their experience against the inexperience of youth for what jobs are out there, and we could expect the youth unemployment figure to climb further.

Lots of news, none of it good!

Other figures show that long-term unemployment reached 833,000, up by 17,000 and the number having to take part-time work because they cannot find a full-time job went up by 44,000 to 1.19m. This was another ‘record’ high since 1992.

Even the number of people claiming Jobseeker’s Allowance, often called the claimant count, rose by 2,400 to 1.46 million. So, both measures of unemployment increased, and this is before the government’s austerity cuts really begin to bite.

On the surface there was some good news, as the number of vacancies rose in the three months to January 2011 by 40,000. But on closer inspection of the figures this was largely due to the number of temporary jobs due to this year’s Census. If these are excluded, vacancies rose by only 8,000. As shadow work and pensions secretary, Liam Byrne, told the BBC: “There are still five people chasing every single jobs and in about a hundred constituencies, 10 people are chasing every job.”

Generally speaking, we need a rate of GDP growth in the economy of about 2% for unemployment to cause unemployment to fall. Not even the most bullish commentator thinks that this will happen this year. The only good news is that rising unemployment may help to dampen inflation down.

What was positive from today’s figures was that the annual growth rate in earnings, including bonuses, was 1.8% in the three months to December last year, down from 2.1% in the three months to November. At least there is no sign of a wage-price spiral kicking in. However, it does mean that with CPI inflation at 4% and RPI at 5.1%, real wages are falling. We can expect disposable income to fall which would have a negative multiplier effect on growth.

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Posted in Earnings, economic growth, UK economy, unemployment

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