U.K. jobless rate highest in 15 years

More than one million young people out of work
By Olesya Dmitracova, Peter Griffiths
|hrreporter.com|Last Updated: 11/17/2011

(Reuters) LONDON - Unemployment in Britain hit its highest in 15 years and the number of young people out of work soared to a record of more than one million, adding to pressure on the government to do more to support a faltering economy.

The coalition government's room to manoeuvre is limited by its pledge to erase the country's huge budget deficit through a tough austerity plan, which includes axing an estimated 400,000 public sector jobs.

The unemployment data provided a suitably gloomy opening to a day likely to be dominated by lower growth forecasts from the Bank of England when it presents its quarterly inflation report.

Employment minister Chris Grayling put the blame on Europe, Britain's main trading partner, and said the government must stick to its austerity measures, which it claims have made Britain a safe haven in the debt crisis.

"These figures are bad news. They are, I'm afraid, the consequence of what we're seeing in the euro zone.

"If you go back four months, unemployment was falling, youth unemployment was lower than 900,000. We've seen a big slowdown in the economy I think as a result of the crisis elsewhere.

"We must not divert from the reduction of the deficit ... we have to do everything we can to support and encourage growth here — and that will be a big focus of the autumn statement in two weeks time," he said, referring to a policy statement due from finance minister George Osborne on Nov. 29.

Record youth unemployment

Osborne has ruled out major changes to the deficit reduction plan in the autumn statement, which is likely to include mainly supply-side measures aimed at improving the country's long-term growth prospects.

The Office for National Statistics said the number of people without a job on the wider International Labour Organization (ILO) measure grew by 129,000 in the three months to September to 2.622 million — the highest level since July to September 1994.

The jobless rate rose to 8.3 per cent, compared with forecasts for a reading of 8.2 per cent. That was the highest rate since April to June 1996.

The number of young people out of work ticked up to 1.016 million, rising above the politically sensitive one-million mark for the first time since comparable records began in 1992 and taking the unemployment rate among eligible 16- to 24-year-olds to 21.9 per cent.

"The big picture is unemployment is rising and the number of jobs is falling while rates of pay growth is easing back as well," said Philip Shaw, chief economists at Investec.

"In truth though, the figures could have been worse and are slightly better than expected; until the U.K. economy regains some traction it's likely that unemployment will continue to rise," he added.

There were some crumbs of comfort. The number of people claiming jobless benefit rose by 5,300 last month, far below analysts' forecasts of a rise of 20,000. That was the smallest monthly rise in claimant count since February.

But average weekly earnings growth including bonuses weakened to 2.3 per cent. Analysts had forecast a pickup of 2.5 per cent. Excluding bonuses, pay grew by 1.7 per cent.

And wage growth is still well below inflation, which stood at five per cent in October, adding to pressures on consumers.

The government is banking heavily on the private sector to create new jobs as public spending cuts are kicking in. However, recent surveys have found job losses in the public sector are likely to continue outpacing hiring by businesses.

The Bank of England is expected to highlight the potential need for more quantitative easing in the coming months to revive the economy, which has been badly hit by sluggish consumer spending and a debt crisis engulfing its main trading partner, the euro zone.

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