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Is the UK in the Eye of a Jobless Hurricane?


The Office for National Statistics said the number of people claiming unemployment benefit fell by 3,700 in October confounding expectations for a rise of 5,000. There was also a downward revision to September’s rise in the claimant count — to 1,300 from the 5,300 initially reported. Could this be fraudsters making an early exit?

The number without a job , which includes those looking for work but not claiming benefits, also declined, falling by 9,000 in the three months to September to 2.448 million. Again one wonders whether the numbers look better as fraudsters back off.

The pound rose after the figures, which were released at the same time as minutes showed Bank of England policy-makers split three ways at their policy meeting earlier this month.

The jobless rate remained steady at 7.7%, as expected, matching its lowest rate since May 2009. Employment rose by 167,000 to 29.19 million, its highest total since February 2009.

While the figures suggest the UK’s labour market has recovered somewhat from the soft patch experienced at the start of the summer, analysts said painful government cuts could cause the jobless rate to rise in the coming months. UK’s government will cut 490,000 public sector jobs over the next four years as part of an austerity drive aimed at cutting a record peacetime budget deficit. Finance minister George Osborne is banking on the private sector creating extra posts to help make up for the loss of state jobs.

Major job losses are on the way in the public sector as the government slashes spending, and we doubt that the private sector will be able to fully compensate for this and wonder if we are in the eye of a jobless hurricane.

Wage growth picked up from recent low levels but remained below inflation. Consumer price inflation rose to 3.2% in September, more than a percentage point above the Bank of England’s 2% target, while retail price inflation is running even higher at 4.5%. Of course this effective deflation of sterling also helps the government.

Average weekly earnings excluding bonuses rose an annual 2.2% in the three months to September, the fastest rate since the three months to March 2009.

With plenty of spare capacity and major public sector job cuts to come, the labour market should be a strong source of downward pressure on inflation over the coming quarters coupled with the impact of possible Euro debt refinancing burdens which includes 84% state owned RBS that has a huge exposure to Ireland.

 

Author: Chris Slay

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