British unemployment falls in May as Olympics seen creating jobs

Employment highest since 2008

LONDON (Reuters) — The total number of Britons without a job dropped in the March to May period as the Olympics in London created extra work, data showed, providing a rare bit of positive news from the recession-hit British economy.

The number of people claiming unemployment benefits, however, rose slightly more than forecast in June, but the Office for National Statistics said  a change in benefit rules may have contributed to the increase.

Britain's labour market has been surprisingly resilient so far given that the economy slipped into its second recession in four years around the turn of the year.

The Bank of England launched a fresh round of quantitative easing asset purchases earlier this month to boost the economy and the government announced a number of guarantee schemes to support investment spending.

The number of people claiming jobless benefit rose by 6,100 last month, the Office for National Statistics (ONS) said. Analysts had forecast an increase of 5,000 on the month.

The ONS said that a change in benefit rules for lone parents may have driven up the number of people claiming unemployment benefits.

The number of people without a job on the wider International Labour Organization (ILO) measure dropped by 65,000 in the three months to May to 2.584 million.

The ILO jobless rate stood at 8.1 per cent, compared with forecasts for an unchanged reading of 8.2 per cent, the lowest rate since the May to July 2011 period.

Employment rose by 181,000 in the three months through May to 29.354 million, the highest level since September to November 2008 period.

The ONS said the rise in employment and the drop in unemployment was concentrated in London, indicating that the Olympics, which start on July 27, have created jobs.

The government has been relying on private firms to create enough employment to make up for the estimated 700,000 jobs it is cutting in the public sector as part of its austerity program, aimed at erasing the country's huge budget deficit.

The International Monetary Fund said on Monday that Britain's growth prospects for the next two years had worsened more than those of any other big advanced economy over the past three months.

Surveys have indicated that employers have started to cut back staffing as the euro crisis was hurting export demand and uncertain outlook kept businesses from investing.

In a sign of limited price pressures from wages, the data showed that average weekly earnings growth including bonuses accelerated to 1.5 per cent versus forecasts for a 1.4 per cent rise. Excluding bonuses, however, pay grew steadily at 1.8 per cent compared to expectations of a 1.9 per cent increase.

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