UK jobless shows surprise fall

The number of Jobcentre vacancies rose by 10,200 in July

UK unemployment has fallen again, to its lowest level since October 1975, official figures have revealed.

The number of Britons claiming unemployment benefit fell 12,800 last month to 950,300, the Office for National Statistics said.

The fall, the ninth monthly decline in a row, continues a trend dating back to end of the recession in the early 1990s.

The number of dole claimants, representing 3.2% of the workforce, has now fallen by an average of 9,300 a month since February.

Surprise fall

The drop surprised City analysts, who had expected the recession in the UK manufacturing sector, and high profile lay-offs in other sectors, to begin to feed through into unemployment rates.

We continue to be amazed by the charmed life of the unemployment figures

Phikip Shaw, Investec

"We continue to be amazed by the charmed life of the unemployment figures," said Philip Shaw, chief economist at Investec.

On Monday, a global survey by the Financial Times newspaper found that at least 25,000 investment bankers had lost their jobs this year, mainly in the US and the UK.

But figures released last week showed the number of lay-offs in the March-to-May quarter was, at 169,000, 11,000 lower than at the same time last year.

"While we have seen a number of redundancies in recent months, new jobs are coming in every day across the country," said Alistair Darling, Secretary of State for Work and Pensions.

"Today's figures show that the UK labour market remains robust."

Inflation fears

Unemployment as calculated by ILO methods, which allow international comparison and which the government prefers to quote, was 14,000 lower in the April-to-June quarter than the three months before, Wednesday's report showed.

The survey also revealed a rise of 10,200 in the number of vacancies posted in Jobcentres last month, compared with June.

But while the report contained good news for job seekers, data showing a rise in earnings of 4.8% in the year to June, 0.2% higher than the May figure, raised concerns in the City.

Analysts fear that higher wage bills will hit the profitability of companies already struggling to cope with the downturn in the global economy.

Salary rises are also seen as contributing to higher inflation, which in turn may dissuade the Bank of England from reducing interest rates further, following the 0.25% cut two weeks ago.

Corporate plea

Company chiefs urged employers in the public sector, where wage rises were strongest, to keep salary increases under control.

John Monks: "Factory job losses are gathering pace"

"If interest rates are to come down further it is important that public sector wage setters are as constrained as the private sector," said Ian Fletcher, chief economist at the British Chambers of Commerce.

"We look to government to send a clear signal calling for restraint."

Both the Confederation of British Industry and the Trades Union Congress, said the plight of UK manufacturers warranted a further interest rate cut.

"Manufacturing job losses are gathering pace and this cannot be sustained in the longer term without damaging the wider economy," said TUC general secretary John Monks.

In the City, Wednesday's report helped send shares lower.

The benchmark FTSE 100 index closed 46.2 points down at 5461.6.