U.K. Jobless Claims Rise 36,500 in October

U.K. unemployment rose at the fastest pace in 16 years in October after companies from banks to builders cut jobs as the economy tilted on the brink of its first recession since 1991.

Claims for jobless benefits rose 36,500 to 980,900, the highest level since March 2001, the Office for National Statistics said today in London.

The report comes a day after Virgin Media Inc., Taylor Wimpey Plc and GlaxoSmithKline Plc and other companies announced a total of more than 5,000 jobs cuts, increasing pressure on Prime Minister Gordon Brown to lower taxes and increase spending to limit the damage caused by the worst financial crisis in almost a century.

The extent of the slump facing the U.K. economy was underlined on Nov. 6 when Bank of England policy makers slashed the benchmark interest rate to 3 percent, the lowest since 1955.

Rising joblessness may make it harder for Brown to maintain his political revival. While Brown has won praise for his handling of the banking crisis, he faces the prospect of fighting the next election with unemployment approaching its highest since the early 1990s. He has until mid-2010 to seek a fourth term for his governing Labour Party.

Unemployment rose for a ninth month in October, and the increase in September was revised to 36,300 from 31,800. The unemployment rate rose to 3 percent last month, the highest since October 2006, from 2.9 percent.

The jobless total based on International Labor Organization methods rose 140,000 in the quarter through September to 1.83 million, the highest since 1997. The rate of 5.8 percent was the highest since 2000 and up from 5.4 percent in previous period. It compares with 7.5 percent in the euro region, 6.5 percent in the U.S. and 4.2 percent in Japan, the statistics office said.

Policy maker David Blanchflower, who has led the push for lower interest rates, predicts that the number of unemployed will reach 2 million by the end of the year. Capital Economics in London forecasts the total may reach 3.3 million by the end of 2010, or 10.5 percent, a rate last seen in the early 1990s.

Banks in London will eliminate 62,000 jobs by the end of next year as employment in the industry falls to the lowest in a decade, the Centre for Economics and Business Research estimated last month. U.K. financial services account for about 10 percent of the economy and contribute a quarter of corporation tax receipts.

Today's data suggest wage pressures have eased. Pay including bonuses rose an annual 3.3. percent in the three months through September, the lowest since 2003. Excluding bonuses, wage growth was unchanged at 3.6 percent.

U.K. Jobless Claims Rise 36,500 in October

TradingEconomics.com, Bloomberg.com
11/12/2008 5:59:26 AM