Jobless count set to rise as austerity hits

UNEMPLOYMENT data published on Wednesday is expected to confirm the gloomy outlook for the UK jobs market and to show that more Britons joined the dole queue last month, intensifying fears of an austerity-induced second wave of job losses.

A consensus of City economists predicts that 2,700 additional people will have been claiming Job Seeker’s Allowance (JSA) in September. This increase follows a 2,300 rise in August.

The wider International Labour Organisation (ILO) unemployment measure is also forecast to rise slightly by 2,000 in the three months to August to 2.47m – an unemployment rate of 7.8 per cent. While more people are expected to have entered employment, economists expect this to be mainly due to an increase in the number of part-time workers.

Next week’s Comprehensive Spending Review, which will see the axe fall on many public sector jobs, adds to the pessimism.

IHS Global Insight’s Howard Archer thinks that unemployment will continue to rise and only peak in the first half of 2012 at around 2.85m, a jobless rate of nine per cent.

“Major job losses are on the way in the public sector as the government slashes spending, and we doubt that the private sector will be able to fully compensate for this,” he said.

“Indeed, we suspect that firms will become increasingly cautious in their employment plans, reflecting slowing growth and their concerns that the intensified fiscal squeeze will hold back expansion over the long term – and recent surveys suggest this is indeed the case.”

There have been modest improvements in private sector firms’ hiring intentions but analysts agree it will be insufficient to offset the public sector cull.

Investec’s Philip Shaw said: “I suspect that many firms currently have a large degree of slack in their workforces and do not need to hire.”

A more flexible labour market meant that job losses were less severe in this recession than they had been in either the early 1990s or the 1980s. However, firms will not increase staff headcounts as quickly in the recovery period.

After a brighter first half of 2010 for the job market – with annual average weekly earnings (total pay) growth expected to have risen by 1.7 per cent in the three months to August – few are expecting the upbeat employment news to continue.