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Last Updated: Wednesday, 14 December 2005, 11:26 GMT
UK unemployment total increases
The weak job market means a rate cut may be on the cards next year
The number of people out of work in the UK has risen, the latest set of official figures has shown.

The Office for National Statistics (ONS) said that the number of people out of work rose by 72,000 to 1.49 million in the three months to October.

That left the unemployment rate at 4.9%, up from 4.7% the month before.

The narrower measure of people out of work and claiming unemployment benefit rose 10,500 to 902,000 in November, the tenth month in a row that it has risen.

"The latest release paints a subdued picture of the labour market," said Philip Shaw, chief economist at Investec.

"The unemployment numbers support the assertion that the economy is growing below trend and there are no signs of higher wage inflation from the labour market," he said.

Shifting odds

Earlier this month, Chancellor Gordon Brown cut his economic growth forecasts in half, saying that the UK would now expand by 1.75% in 2005.

At the same time, a number of large firms, including British Airways (BA), have been looking at ways of cutting costs.

In November, BA announced plans to cut almost 600 management jobs by March 2008.

A number of analysts have now said that the Bank of England is likely to cut interest rates once the threat of inflation recedes.

Howard Archer, an economist at Global Insight, said that the recent unemployment data shifts the odds "significantly towards an interest rate cut fairly early on in 2006".

"Particularly as it follows generally benign consumer and producer price inflation data for November," he said.

Average earnings figures underlined the view that the threat of inflation may be on the wane.

According to the ONS, average earnings including bonuses rose by 3.6% in the year to October, down from an increase of 4.1% the previous month. Not counting bonuses the increase was 3.9% compared with 4% the month before.

"The labour market data offers further support to our negative view on the UK economic outlook and increases the chances of a rate cut in early 2006," said James Knightley of ING Financial Markets.

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