The UK is suffering a “major jobs and pay crunch” after unemployment hit 2.6 million, a figure not matched in 17 years and higher than consensus forecasts for 2011 as a whole.
According to the Office for National Statistics, the number of people out of work in the three months to September rose by 129,000, the highest level since the third quarter of 1994. Jobless rates came in at 8.3%, 0.1% worse than market expectations and at the highest rate since the second quarter of 1996.
The number of individuals claiming Jobseeker’s Allowance likewise increased by 5,300 to 1.6 million in October, a bright spot in that it was the smallest monthly rise in claimant count since February.
Average weekly earnings growth, which included bonuses, weakened to 2.3%, however, compared with a predicted pick-up to 2.5%. Excluding bonuses, average pay rises were only 1.7%, about three times lower than inflation at around 5%.
John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, said: “The UK is now clearly suffering a major jobs and pay crunch under the combined impact of tough fiscal policy medicine and very uncertain conditions in the global economy. The private sector is simply unable, at present, to create enough jobs to offset public sector job cuts.”
Outlook weak into 2012
With nothing to suggest that the economy would pick up any time soon, he predicted that unemployment would at best peak at 2.75 million next year or at three million by 2014 if the country went into a double dip recession.
Scott Corfe, senior economist at the Centre for Economics and Business Research predicted, meanwhile, that growth prospects in the West would remain weak for the rest of this year and into next. This meant that unemployment rates would “continue rising over the coming quarters, peaking at 8.7% in 2013”.
“Unemployment didn’t rise as sharply as most economists expected during the financial crisis, but a prolonged period of slow growth post-crisis means that an improvement in the labour market any time soon is highly unlikely,” Corfe added.
But the CIPD’s Philpott also pointed to a worrying 305,000 drop in the number of full- and part-time employees. While youth unemployment rates of 1.02 million were most likely to grab headlines, he noted that the overall jobs situation would have looked much worse if self-employment figures had not risen by 100,000.
But also of grave concern was the 868,000 increase in the number of people who had been looking for work for more than a year, some 30% of whom were aged between 16 and 24. “It is these long-term unemployed young people rather than unemployed youths as a whole who should be the prime target of Government policy measures,” Philpott said.
