LONDON (Reuters) — The number of Britons out of work fell to the lowest level in nearly one year in the three months through June, data showed on Wednesday, providing some rare good news from the recession-hit economy.
The fall in unemployment and the rise in employment will come as a relief for the government, under intense pressure to revive the economy, which is stuck in recession as cuts to public spending, the euro zone debt crisis and a lack of bank lending hold back growth.
The number of people claiming jobless benefits fell by 5,900 in July, the Office for National Statistics (ONS) said. Analysts had forecast an increase of 6,000 on the month.
The number of people without a job on the wider International Labour Organization (ILO) measure fell by 46,000 in the three months to June to 2.564 million.
The jobless rate dipped to eight per cent, the lowest level since the three months to July 2011 and compared with forecasts for an unchanged reading of 8.1 per cent.
The ONS said the decline in unemployment was largely due to falling jobless numbers in London, where also almost one-half of the new jobs were created, adding to signs that some of the labour market improvement was due to the Ollympics.
Employment in Britain rose by 201,000 in the three months through June to 29.476 million, the biggest quarterly rise since May to July 2010 and the highest level since May to July 2008.
The economy has been stuck in recession since late 2011 and while a modest rebound over the summer is likely due to one-off factors and a boost from the London 2012 Olympics, a more sustained recovery looks elusive.
The Bank of England sees no growth for the full year, while other economists expect the economy to shrink.
The rise in employment in a declining economy has been one of the biggest riddles for economists, and many expect unemployment to rise in due course.
Business surveys have shown relatively stable staffing plans, though a recent poll showed the number of people placed in permanent jobs in Britain fell for the second straight month in July.
The government has been hoping private companies create enough jobs to make up for the some 700,000 jobs expected to be lost due to its plan of government spending cuts aimed at erasing the country's large budget deficit.
The fall in unemployment may help to support consumption as many Britons have been holding back spending as fears about job security weighed on confidence.
However, the ONS' wage data showed inflation of 2.6 per cent in July still outpaced earnings increases, denting consumers' spending power.
Average weekly earnings growth including bonuses rose by 1.6 per cent in the three months to June, compared to one year ago. Analysts had forecast a rise of 1.8 per cent. Excluding bonuses, earnings increased by 1.8 per cent compared to a forecast of 1.9 per cent.