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Cath Everett

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Employment downturn imminent, say experts

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Conditions in the labour market are weaker than earlier in the year and evidence suggests that a renewed employment downturn is imminent, experts have warned.

 
Although figures from the Office of National Statistics indicated that UK unemployment fell by 26,000 to 2.45 million or 7.7% of the total workforce in the three months to May, the number of people claiming Jobseeker’s Allowance rose by 24,500 to 1.52 million in June – the biggest jump in two years.
 
The increase follows an upwardly-revised rise of 22,500 in the claimant count for May. It is the second month in a row that the claimant count has grown, while the unemployment total (which is based on a separate study) has fallen.
 
The ONS attributed the discrepancy to an increase in the number of women claiming Jobseeker’s Allowance because of changes to the benefits system. But many economists consider the claimant count to be a more accurate indicator of the health of the labour market than unemployment figures.
 
Chris Williamson, economist at research firm Markit, told the BBC: “While [unemployment] data suggest some tentative improvement…..more up-to-date information suggests that weakness lies ahead. The number of job vacancies….fell by 7,000 between the first and second quarters of the year, and Markit’s recent survey of recruitment consultancies showed that the number of people placed in permanent jobs showed the weakest rise for 22 months in June.”
 
John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, was equally downbeat. In his view, the ONS figures suggested that labour market conditions were weaker than earlier in the year and the headline improvement in employment and unemployment was relatively small.
 
Job vacancies continued to fall, the same number of unemployed people were now chasing each one as in the recessionary days of spring 2009 and redundancies were starting to increase as public sector cutbacks started to bite.
 
Moreover, the welcome 42,000 drop in youth unemployment “should not be exaggerated” as it was almost entirely due to more 16 to 24 year olds turning to full-time education as an alternative to joblessness. There was barely any quarterly increase in the number of young people in work.
 
This made it clear that the underlying jobs situation was “deteriorating”, Philpott warned.
“The labour market is on the turn, with unemployment on the headline measure as well as the claimant measure set to increase,” he said. “All that remains to be seen is how bad things get. Continued slow wage growth may help dampen the rise in unemployment, but either way the pain hitting the UK workforce will be severe for some considerable time yet.”
 

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