U.K. jobless claims fell more than economists forecast in May and a wider measure of unemployment also declined, providing further evidence that an economic recovery is under way.
Jobless claims fell 8,600 from April to 1.51 million, leaving the rate at a 2 1/2-year low of 4.5 per cent, the Office for National Statistics said today in London. Unemployment as measured by International Labour Organisation methods fell 5,000 in the three months through April to 2.51 million, a rate of 7.8 per cent. Employment rose 24,000 to a record 29.8 million.
Recent data show the economy is gathering momentum after a return to growth in the first three months of the year, and Bank of England Markets Director Paul Fisher said today that the second quarter “looks very good.” Still, wages are under pressure and growth may not be strong enough to deliver further significant improvements to the labor market, economists said.
“After being in a pretty long funk for the past couple of years there is something of an acceleration going on” in the economy, said Neville Hill, an economist at Credit Suisse Group AG in London and a former U.K. Treasury official. “But it isn’t very strong, and certainly nothing like escape velocity.”
The pound advanced for a second day against the euro and was trading at 84.83 pence as of 11:30 a.m. in London after touching 84.70 pence, the strongest level since May 21. It rose 0.1 per cent to US$1.5662. Government bonds were little changed after falling for four consecutive days on speculation the Bank of England will refrain from further asset purchases. The 10- year yield was at 2.17 per cent.
Delayed Bonuses
Pay growth accelerated to 1.3 per cent in the three months through April from 0.6 per cent. Some of the increase may be explained by delayed bonus payments as highly paid workers sought to take advantage of a cut in the top income-tax rate to 45 per cent from 50 per cent that took effect in April.
Basic pay growth was 0.9 per cent versus 0.8 per cent in the previous period, underlining the pressure on living standards at a time when inflation is running at 2.4 per cent.
The outlook for jobs remains “firmly positive,” with construction set to emerge from the recession that has gripped the sector for the past five years, a Manpower survey this week showed.
The euro region is also showing signs of a pickup from its record-long recession. Data today showed euro-area industrial production unexpectedly increased in April. Factory production rose 0.4 per cent from March, compared with a forecast for no change, according to the median of 36 economists’ predictions.
In Asia, however, statistics today showed machine orders in Japan fell 8.8 per cent in April from March, and South Korea’s unemployment rate climbed to 3.2 per cent in May. A measure of consumer sentiment in Australia climbed in June.
Fisher’s View
The slump in the euro area, Britain’s biggest export market, and government austerity at home continue to weigh on the U.K. economy. In addition, companies that curbed costs during the recession by cutting wages rather than firing workers may want to see productivity improve before adding staff.
Fisher of the Bank of England, speaking at an event in London today, said that he’s “not happy with unemployment where it is and not happy about growth being as slow as it is.”
“Growth is going to be slow for a long time,” he said. “The second quarter as it happens looks very good but these things will slip from one quarter to another.”
The U.K.’s claimant count has fallen for seven straight months to its lowest level since May 2011. In April, it fell 11,800 instead of the 7,300 drop initially reported. Job vacancies in the economy rose 19,000 in the quarter through May to 516,000, the highest level since 2008, the ONS said.
Cameron Austerity
Prime Minister David Cameron’s deficit-reduction program saw public-sector employment fall 22,000 in the first quarter to 5.7 million, the lowest since December 2001. Cuts in local government and publicly controlled companies accounted for all of the decrease. Central government employment rose 13,000. Private-sector employment increased 46,000 to 24.1 million.
There were increases in both full-time and part-time work in the three months through April, with the number of workers over the age of 65 rising above 1 million for the first time.
Unemployment among 16-24-year-olds declined 43,000 to 950,000, though the number of people out of work for at least a year climbed by 11,000 to 898,000, or 35.8 per cent of the U.K. jobless total.
BLOOMBERG
