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UK unemployment falls for first time since 2008

January 20, 2010 | "Times Online"

The number of people out of work fell by 7,000 to 2.46 million - the first decline in unemployment since the three months to May in 2008, official figures revealed today.

Data from the Office for National Statistics (ONS) also revealed that the number of people claiming jobseeker's allowance shrank while high rate of youth unemployment also fell.

Today’s unemployment figures, for the three months to November, will be a boost to Labour which is planning to fight this year’s general election on platform of a series of jobs guarantees, and has already outlined a £1.5 billion pledge to ensure that no 16-to-24-year old is out of work longer than six months.

The numbers claiming jobseeker's allowance fell by 15,200 in December to 1.61 million. Unemployment among 16-to-24-year olds in the three months to the end of November declined by 16,000 to 927,000.

However, the improvement masked a rise in the number of people in the labour force who are neither working nor looking for work, with the inactivity rate rising to 21.2 per cent in the three months to November, the highest since the three months to August 2007.

The number of people who were economically inactive rose to 8.046 million - the highest since records began in 1971.

Also the figures showed that while those in full-time employment fell 113,000 to 21.2 million in the three months to the end of November, those in part-time jobs grew by 99,000 to 7.7 million.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "We suspect that it is premature to celebrate the end of rising unemployment. This suspicion is reinforced by the fact that full-time employment still fell appreciably in the three months to November."

The Government gave today's figures a cautious response. Yvette Cooper, Secretary of State for Work and Pensions, said: “The jobs market is still tough for a lot of people, but the drop in unemployment and youth unemployment is very welcome."

The ONS also published its new average weekly earnings series, a measure which it says provides a more reliable gauge of wage developments in the economy, and which replaces the old average earnings index.

It showed average weekly earnings rose by an annual 0.7 per cent in the three months to November. Excluding bonuses, average weekly earnings were up 1.1 per cent - the smallest increase since the series began in 2001.

Today’s unemployment figures emerge before data, due next week, which is widely expected to show Britain exited from the longest recession in history during the final three months of 2009.

The UK is the only major economy still in recession after America, China, Japan, France and Germany reported growth in the third quarter of last year. Ireland also followed suit by emerging from a full-blown slowdown at the end of last year.

Yesterday, the Governor of the Bank of England piled pressure on the Chancellor to specify sharp spending cuts in his March Budget or risk a damaging backlash from the markets.

Mervyn King said that the patience of Britons was likely to be “sorely tried” over the coming years, with pay stagnating and inflation threatening to rise above 3 per cent.

Britain’s economic health hinges on Alistair Darling being open about how he intends to slash the £178 billion deficit, he said.

Lord Mandelson, the Business Secretary, also underlined the high stakes involved in the pre-election Budget. He warned that Britain, along with the rest of Europe, faced a phase of “rapid relative economic decline” if governments failed to cut spending.

The warnings came as it emerged that the annual inflation rate rose from 1.9 per cent in November to 2.9 per cent in December — the biggest monthly rise on record and well ahead of the Bank's target of 2 per cent.

Analysts said that much of the change was due to base effects from events in December 2008, such as the cut in VAT from 17.5 per cent to 15 per cent.

Robert Lindsay

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