UK jobless claims unexpectedly increased in August for the first time in seven months, a sign the economic recovery may be faltering just as the government starts the country's biggest austerity drive since World War II.
Claims for unemployment benefits rose by 2,300 to 1.47 million, the Office for National Statistics said today. Overall unemployment in the quarter through July fell by 8,000 to 2.47 million.
The job market is showing signs of weakening as the economy braces itself for budget cuts of as much as a quarter from Prime Minister David Cameron's government, to be outlined next month.
Bank of England policymaker Martin Weale said yesterday the public spending squeeze may weigh on the labour-market recovery and unions are pledging coordinated strike action.
"The unemployment numbers are a disappointment," Neil Mackinnon, an economist at VTB Capital in London and a former official at the British Treasury. The data "highlight the difficulties facing the UK economy.
This will also increase tensions between trades union and the government."
The pound dropped more than 0.1 per cent against the dollar after the report, and traded at $1.5497 as of 9:46 am in London. The benchmark yield on the two-year government bond was up 2 basis points today at 0.677 per cent.
The claimant-count unemployment rate stayed at 4.5 per cent in August. Edinburgh-based Royal Bank of Scotland Group Plc, Britain's biggest government-controlled bank, said September 2nd it will cut 3,500 U.K. jobs and close 10 offices to reduce costs.
The UK unemployment rate based on International Labour Organization standards held at 7.8 per cent in the three months through July. That compares with 10 per cent in the euro region, 9.6 per cent in the US and 5.2 per cent in Japan, the statistics office said.
Employment still increased in the quarter through July by 286,000, the most since records began in 1971. The total of people in work reached 29.16 million, the highest level since the first quarter of 2009, the statistics office said.
Bank of England governor Mervyn King will address the TUC meeting in Manchester today. The bank left the benchmark interest rate at a record low of 0.5 per cent on September 9th and its bond-purchase plan at £200 billion.
Bloomberg