Jobless rise stokes growth fears

LONDON Wed Sep 14, 2011 1:00pm BST

A pedestrian walks past an employment centre in London August 17, 2011. REUTERS/Suzanne Plunkett

A pedestrian walks past an employment centre in London August 17, 2011.

Credit: Reuters/Suzanne Plunkett

Related Topics

LONDON (Reuters) - Britain's unemployment rate rose at its fastest pace in two years in the three months to July and one of its biggest retailers saw a large fall in first-half profit, underlining the fraught economic outlook and raising pressure on the government to act to boost growth.

Official figures showed record public sector job losses fuelled the rise. The main opposition Labour Party accused the government of choking growth through deep spending cuts aimed at wiping out a record peacetime budget deficit.

The coalition government brushed aside calls to change its austerity drive but said it would support dozens of major infrastructure projects to support growth.

"These unemployment figures are disappointing," Prime Minister David Cameron told parliament. "It is right that we get on top of our debts and our deficits, and today of all days shows the danger of getting into a position other European countries are in."

With public finances so strained, extra help for Britain's economy would have to come from the Bank of England in the form of a second round of asset purchases and a decision to keep interest rates at their record low of 0.5 percent.

The economy has barely grown since last September, and the sovereign debt crisis in the euro zone, its biggest trading partner, has added to worries that the UK could slip back into recession.

Ministers say that failing to cut Britain's deficit could lead to the sort of crisis seen in Greece and other highly indebted European countries.

Labour, which argues that the cuts are too big and are taking place too quickly, said it was a "day of misery on Britain's jobs front."

"Today we have the clearest and starkest evidence yet that the government's plan for growth is hurting not helping Britain," said Liam Byrne, Labour work and pensions spokesman.

Brendan Barber, head of the Trades Union Congress, which represents 58 unions with more than 6 million members, said the jobless figures were "terrible."

"They are further evidence that the recovery has been choked off by a self-defeating rush to austerity," he said.


The Office for National Statistics said claimant count unemployment rose for the sixth month in a row in August. The climb of 20,300 was smaller than July's 33,700 increase and below forecasts for a jump of 35,000, but continued a rising trend since February.

On the wider International Labour Organisation (ILO) measure, which includes people looking for work, the jobless total rose by 80,000 to 2.51 million in the quarter to July, the biggest quarterly hike since August 2009. The jobless rate came in as forecast at 7.9 percent.

The number of people in employment also fell by 69,000 in the three months to July, the biggest drop since March 2010.

The ONS said the jobless rise and drop in employment were partly driven by the biggest drop in the public sector workforce since records began more than a decade ago.

Public sector employment tumbled by 111,000 between April and June to 6.037 million.

Chancellor George Osborne hopes the private sector will fill the gap left by public cuts. However, corporate results on Wednesday from one of Britain's biggest retail chains highlighted the headwinds facing the economy.

John Lewis, often seen as a barometer for UK retailers, reported an 18 percent drop in first-half profit, hit by discounting at its department stores and a step up in investment, and it predicted tough trading conditions into 2012.

Many Britons are cutting back on spending in the face of higher prices, muted wages growth and government austerity.

A survey last week showed British like-for-like retail sales fell 0.6 percent year-on-year in August.

The rise in unemployment supported views that the Bank of England would soon pump more money into the economy to restart the recovery.

Bank policymaker Adam Posen said on Tuesday that the central bank should start with an immediate 50 billion pounds purchase of UK government bonds or risk an even more bleak economic outlook.

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (2)
Marylyn wrote:
“The official numbers add to pressure on the government to do more to boost growth as budget cuts that have helped keep it out of trouble on debt hurt thousands of households.”

What CAN they do?

Policies were built on vacuous assumptions; hopes, more like, that haven’t materialised. If the private sector is to soak up the public sector jobless then the private sector has to expand – and that isn’t just down to easier borrowing. The private sector makes or does things, and if the target market has no money to buy then firms will simply pile up stock on the back of whatever funds they can get. “Demand” has to be stimulated, the economists like to say; but in hard times nice-to-haves don’t make demand. What the gov hope for is not so much demand but “stimulating latent desires” as the marketing supremos call it.

Well, no amount of stimulus at the moment will inspire the newly jobless to splurge on spending sprees, not when they have to worry about where the next mortgage payment – or even the next meal – is coming from. If, as rumours suppose, Sir Mervyn fires a new salvo of quantitative easing, lending might ease up a bit…but that doesn’t mean that buying will follow. The only hope is that savers, the value of their holdings reduced even more will ditch their money with resignation in a Weimar operation where to own a wheelbarrow is far wealthier than the money it contains.

Sep 14, 2011 12:28pm BST  --  Report as abuse
TommyUK1 wrote:
Putting ones faith in the private sector to soak up the newly unemployed, is like trusting bankers or politicians to do the decent thing, it is an exercise in futility, the bottom line rules.
Too much is in the hands of market speculators who make money out of other peoples losses in this case the UK public.
Where has all the money gone? It has not disappeared it is held by organisations and individuals waiting for the next exploitative opportunity. Sadly we do not have a Government with the moral backbone to challenge such organisations/people.
In the mean time misery awaits many and has arrived already for many.
Arguing about stimulating demand makes me laugh, when jobs are scarce, employment security non-existant, pensions under attack, housing market depressed (apart from the South East), People of the UK are wisely spending carefully if at all. There is a dual state of existance in the UK, those who have and those who have not, so many more in the latter and our privately wealthy leaders say we must heal divided Britain! It is just rhetoric for the gullible public.

Sep 14, 2011 1:17pm BST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.