U.K. jobless claims unexpectedly rose in March, led by women as a change in benefit rules pushed people into the labor market.
Jobless benefit claims rose by 700 from February to 1.451 million, the Office for National Statistics said today in London. That compared with the median forecast of 22 economists in a Bloomberg News survey for a drop of 3,000. Unemployment measured by International Labour Organization methods slipped to 7.8 percent in the quarter through February from 7.9 percent in the three months through November.
Payrolls rose to the highest in two years in the quarter, which may add strength to Prime Minister David Cameron’s argument that the economy can withstand a government budget squeeze that will cut more than 300,000 public-sector jobs. While the Bank of England is aiding the recovery by keeping its key interest rate at a record low, consumer confidence remains weak on concern that unemployment may increase.
“The data is mixed. The fall in the unemployment rate is fairly good news, but we have to bear in mind that most of the public-sector job losses are still to come,” said Hetal Mehta, a London-based economist at Daiwa Capital Markets Europe. “Combined with the fact that average earning growth is low, the Bank of England won’t be in a rush to put up interest rates.”
The pound pared its gain against the dollar after the report. It traded at $1.6274 as of 11:40 a.m. in London, up 0.1 percent from yesterday. Bonds declined, with the yield on the 10-year gilt rising 4 basis points to 3.74 percent.
Single-Parent Benefits
In March, 4,400 men came off jobless benefits and 5,100 women joined the register. The statistics office said a change in eligibility for single-parent benefits, which disproportionately affects women, pushed more people into the labor market to seek work. The U.K. claimant count rate stayed at 4.5 percent in March.
U.K. policy makers left their benchmark interest rate at 0.5 percent this month. While inflation is double the Bank of England’s target, it eased to 4 percent in March from 4.4 percent in February, data yesterday showed.
Today’s report showed that pay growth slowed in the quarter through February, supporting the central bank’s argument that above-target inflation isn’t fueling demands for higher pay.
Weekly pay including bonuses rose 2 percent in the quarter from a year earlier, compared with a 2.3 percent gain in the previous three months. The slowdown was led by financial services and manufacturing. Excluding bonuses, pay growth eased to 2.2 percent from 2.3 percent.
Pay Squeeze
“With pay growth still well below the rate of inflation, the continued squeeze on real pay suggests that the recent weakness of consumer spending is unlikely to let up any time soon,” said Vicky Redwood, an economist at Capital Economics in London. This “further reduces the chances” of the Bank of England raising interest rates next month.
Employment rose by 143,000 in the three months through February to 29.23 million, the highest in two years, the statistics office said. That left the employment rate at 70.7 percent. Unemployment measured by ILO methods fell by 17,000 to 2.48 million in the quarter from the previous three months.
Britain’s unemployment rate compares with 9.9 percent in the euro region, 8.8 percent in the U.S. and 4.6 percent in Japan, the statistics office said.
“These figures are another step in the right direction,” Employment Minister Chris Grayling said in a statement. “However, there are challenges ahead and our priority is to continue to support the economy, by reducing the deficit and putting in place measures to encourage growth.”
Consumers remain concerned about the outlook for employment. A job-security index published by Lloyds Bank Corporate Markets fell 2 points to a 4-month low of minus 27, the bank said on April 4. BAE Systems Plc, Europe’s biggest defense company, said yesterday that it will cut 230 jobs at its vehicle business and close a factory in the U.K.
--With assistance from Mark Evans and Harumi Ichikura in London. Editors: Fergal O’Brien, Andrew Atkinson
Source: Bloomberg By Scott Hamilton
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