Page last updated at 12:18 GMT, Wednesday, 16 July 2008 13:18 UK

UK jobless level increases again

Housing development built by Persimmon
House builders have cut thousands of jobs in 2008 as the economy cools

Unemployment in the UK rose by 12,000 to 1.62 million in the three months to May, the Office for National Statistics (ONS) has said.

The rate of unemployment was 5.2%, unchanged on the previous quarter.

The number claiming unemployment benefit rose by 15,500 in June to 840,100 - the biggest jump since December 1992.

Employers have cut jobs in the face of rising energy costs, falling consumer confidence and a property slump.

The claimant count is the biggest in more than 15 years... it is a sign of things to come over the next year as the economy weakens
Philip Shaw, analyst, Investec

Job vacancies also fell by 32,200 to 655,100 between April and June.

Analysts said the sharp rise in the number of people claiming benefits was a worry.

"The claimant count is the biggest in more than 15 years. While not vastly different from what was expected, it is a sign of things to come over the next year as the economy weakens," said Philip Shaw at Investec.

The slowing economy has taken its toll in the financial and property sectors, with home builders cutting thousands of jobs over the past few months.

This month alone, house builders Bovis, Redrow, Barratt and Persimmon announced they would cut more than 2,000 jobs between them, although those redundancies are not included in the latest quarterly figures.

Wages worries

Annual average earnings growth over the period eased to 3.8% in May from 3.9% in April, the ONS said.

Analysts warned of further misery for consumers in the face of rising fuel and food bills.

"With wages failing to keep pace with the cost of living and unemployment rising, the outlook for consumer spending remains grim," said James Knightley, an analyst at ING.

Meanwhile, there was more evidence of subdued wage growth from a report from the Engineering Employers' Federation, which said pay settlements remained at 3.1% in the three months to June.

On Wednesday, thousands of local government workers went on strike in protest over wages which they say are not keeping pace with living costs.

The Bank of England is worried that the highest inflation in a decade - consumer price inflation currently stands at 3.8% - will encourage workers to ask for higher pay and make the problem worse.

Analysts said the data might reassure the Bank that the current inflation spike had not yet been reflected in wage demands.

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