Britain's resilient labour market has finally succumbed to the strains of the consumer slowdown, official figures showed yesterday as joblessness and inactivity rose while employment and wage growth fell.
The number of people claiming unemployment benefit rose in June for the fifth month in a row - the longest run of increases since the end of the 1990s recession.
Analysts said that the figures, which came as British American Tobacco shed 530 UK jobs, highlighted the need for an interest rate cut. "This is further evidence that a turning point in the labour market has been reached," said Simon Rubinsohn, chief economist at Gerrard fund managers, which forecasts a rate cut next month. The Office for National Statistics said the claimant count rose by 8,800 last month.
The jobless tally has risen by 51,100 since the start of the year. The last time there were at least five successive increases was in the winter of 1992.
The total number in work fell by 72,000 in the three months to May, while the number of economically inactive men as a share of the workforce jumped to an all-time high of 16.6 per cent over the same period.
The fall in employment was more than accounted for by a drop of 82,000 full-time jobs. "That is a shocking figure," said Danny Gabay, an economist at Fathom Consulting, which is looking for rates to fall to as low as 2 per cent.
The annual growth rate in average earnings - wages, salaries and bonuses - slowed from 4.6 per cent in the three months to April to 4.1 per cent in May. This is well below the 4.5 per cent limit the Bank of England sees as consistent with hitting its inflation target.
However, there were some upbeat signs, with the preferred labour force survey measure of employment rising by 4,000 over the quarter to May and public sector earnings growth posting an all-time high increase of 7.6 per cent in May.
Allan Flowers, the ONS's labour market statistician, said it was not possible to say whether it had hit a turning poin, but he said the rise in joblessness mirrored the slowdown in the wider economy. "Turning points can only be seen in hindsight. Catching one while it is still alive is the stuff of JK Rowling," Mr Flowers said.
GDP growth slowed from 0.6 per cent in the final quarter of 2004 to 0.4 per cent in the first three months of this year, thanks to a slowdown in household spending growth to just 0.1 per cent. Malcom Barr, the UK economist at JP Morgan, said: "Income generation for households is beginning to fade, and the case for the Bank to respond with a rate reduction is clear."
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