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Business News

Fall in jobless rate provides glimmer of economic hope

The economy continued to create jobs in the three months to April, despite the double-dip recession, official figures showed yesterday.

Unemployment fell by 51,000 to 2.61 million according to the Office for National Statistics, taking the national jobless rate down to 8.2 per cent.

In previous months, increases in employment have been mainly driven by the creation of more part-time jobs. But this month, the rise was equally shared between full time and part time. The number of full-time workers increased by 82,000 and the number of part-time workers rose by 83,000.

Ministers also took heart from the fact that while public-sector employment dropped by 39,000 to 5.9 million, employment in the private sector increased by 205,000 to 23.38 million.

Overall, there are reported to be 29.28 million people in work, an increase of 166,000 on the previous three months.

Analysts welcomed the figures, which have defied forecasts that unemployment would rise sharply thanks to the return to recession.

David Kern, the chief economist at the British Chambers of Commerce, said: "This is encouraging news at a crucial time for the UK economy. Overall, these figures show a flexible and robust job market. This proves that the private sector is willing and able to create new jobs while public-sector employment continues to shrink."

However, offsetting, this surprisingly positive picture, the ONS reported an 8,100 increase in the number of people claiming Jobseeker's Allowance in May. The numbers who have been out of work for more than a year also rose by 30,000 to 886,000.

There was some encouraging news on youth unemployment, with the number of jobless 16 to 24-year-olds declining by 29,000 to 1.01 million over the quarter. But stripping out the numbers from that age group in full-time education, the ONS reported that the numbers in jobs fell by 23,000 over the three months.

Men also benefited more than women from the jobs created. The number of unemployed men fell by 49,000 over the three months and the number of women by just 1,000.

Some economists also warned it would be difficult for the positive trend to continue given the headwinds still facing the UK from the eurozone.

"The big question is how long the labour market's overall resilience will last given the economy's ongoing weakness and the current very worrying and uncertain outlook," said Howard Archer of IHS Global Insight. "The rise in claimant count unemployment in May could be a sign that this resilience is starting to wane."

The ONS figures showed that total remuneration, excluding bonuses, rose by 1.8 per cent on a year earlier, which economists suggested was below trend.

"Pay growth continues to remain sluggish. Even though inflation is starting to ease rapidly, wage growth at just 1.8 per cent suggests that it will be some time before households' real incomes start to rise," said Nida Ali, economic adviser to the Ernst & Young Item Club.