Surge in UK jobless
Expectations that the Bank of England would keep interest rates on hold were heightened yesterday as official data revealed the number of people claiming unemployment benefit had surged by the highest monthly amount for 16 years.
The Office for National Statistics said unemployment rose by 15,500 last month, after an upwardly revised 14,300 increase in May.
It is the biggest jump since a 71,000 rise in December 1992 and was far more than the 10,000 increase analysts had expected.
Meanwhile, annual average earnings growth in the three months to May eased to 3.8 per cent from 3.9 per cent in April, implying higher living costs have yet to feed through to wages. The findings come on top of Tuesday’s data showing consumer inflation is now at its highest level sine 1992, hitting 3.8 per cent in June.
The statistics will have come as a relief to the government and the BoE, both of which are concerned that high inflation levels will lead workers to demand much higher pay and embed sharp price rises.
“If we are right in expecting pay growth to remain subdued, the next move in interest rates should still be down. But, the next rate cut may be some way off. In the meantime, the economy and labour market are in for a rough ride,” said Vicky Redwood, economist at research group Capital Economics.
“We continue to believe that the MPC will not tighten policy without signs of second round inflation effects,” added David Page, economist at Investec.