FURTHER signs of a deteriorating jobs market emerged yesterday, intensifying fears of a second wave of rising unemployment as a leading report showed that the private sector could lose 500,000 jobs as a result of government cuts.
Official data showed that the number of people claiming Job Seeker’s Allowance last month rose by 5,300 to 1.47m and August’s increase was revised up to 3,800. Although the broader ILO measure revealed unemployment continuing to fall in the three months to August, it was the smallest quarterly drop since January and was driven by fewer unemployed 16 and 17-year-olds.
While the August decrease saw the jobless rate edge down to 7.7 per cent, many City economists forecast that the rate could head back up to more than eight per cent over the next year as public sector cuts begin to really bite. The Office for Budgetary Responsibility (OBR) has estimated that 600,000 public sector jobs could be lost as a result of government cuts.
Economists think it unlikely that the private sector will be able to offset rising public sector unemployment. “These increases in unemployment come before any of the planned public spending cuts have been implemented. Business survey data continues to suggest that the private sector is wary of hiring in the current climate of uncertainty,” said Andrew Goodwin at the Ernst & Young Item Club.
A report yesterday from PricewaterhouseCoopers (PwC) said that austerity measures could also hurt the private sector, as firms supplying the government will cut jobs and output. The report said the private sector could lose almost half a million jobs and £46bn in annual gross output by 2014-2015 as efforts to slash a budget deficit hit the supply chain.