U.K. May Unemployment Rises

U.K. unemployment rose to the highest in seven months in May as weakening economic growth prompted companies to cut staff.

Claims for jobless benefits increased for a fourth month, rising by 9,000 to 819,300, the Office for National Statistics said today in London. Economists predicted an increase of 8,000, the median of 33 forecasts in a Bloomberg News survey shows.

The labor market is weakening at a time when policy makers have little scope to lower interest rates and prevent a recession because of the threat of accelerating inflation. Bank of England Governor Mervyn King said yesterday the U.K. faces ``a period of rising inflation and falling economic growth.''

Measured by International Labour Organization standards, unemployment was 5.3 percent in the three months to April. That compares with 7.1 percent in the euro area, 5.5 percent in the U.S. and 4 percent in Japan.

Rising unemployment may erode Prime Minister Gordon Brown's support as he tries to bolster his position before the next general election, due by mid-2010. In a Populus poll, his ruling Labour Party slipped 4 percentage points to 25 percent since early May, while the Conservative Party's support rose 5 points to 45 percent in a Populus poll, the London-based Times said yesterday.

The government faced pressure today from the European Commission to reduce its budget deficit, saying that it is ``not respecting'' European Union rules on public finances.

London job vacancies at financial-services companies slumped amid a slowing British economy and job cuts across securities firms, a survey showed today. The number of new job vacancies in the financial-services industry fell about 17 percent in May from a year earlier, recruitment consultant Morgan McKinley said.

Falling house prices are also helping exacerbate Britain's economic slowdown as higher credit costs make it difficult for people to afford homes. The Royal Institution of Chartered Surveyors said yesterday that house prices fell in May, keeping declines close to the most widespread level in three decades.

U.K. economic growth weakened to a three-year low in the quarter through May, the National Institute of Economic and Social Research said. Gross domestic product rose 0.2 percent, a third of the pace of the three months through February, the London-based group said today.

Policy makers halted their series of interest-rate cuts after three reductions since December as the inflation rate jumped to the government's 3 percent upper limit in April because of record oil costs. They said at their meeting in May that they wanted to make clear to wage setters the bank's commitment to return inflation to the 2 percent target.

U.K. May Unemployment Rises

TradingEconomics.com, Bloomberg
6/11/2008 8:37:55 PM