Jobless at 21-year low, but 'magic million' proves elusive

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The Independent Online

A drop in the jobless total to a 21-year low last month saved Labour the embarrassment of two successive months of rising unemployment.

A drop in the jobless total to a 21-year low last month saved Labour the embarrassment of two successive months of rising unemployment.

But the fall in the claimant count was the smallest for 10 months, and the Government's statisticians said the decline in unemployment had "flattened out". National Statistics said the number of people out of work and claiming benefit fell by 5,400 to 1.04 million, the lowest since 1979. At 3.6 per cent, the rate is the lowest since 1975. In October there was an unexpected rise of 3,600.

NS said unemployment had fallen by an average of 3,100 a month in the past three months, compared with an average of 11,000 in the last six months.

Graham Winter, a labour market statistician, said: "The latest figures confirm that the downward trend in unemployment has flattened out." This threatens ministers' hopes that the claimant count will fall below the magic million before a general election - if at all.

But Tessa Jowell, the Employment minister, welcomed the fall in the jobless total. "New vacancies are still at high levels, and I am pleased that the claimant count - which is the most up-to-date figure we have - is falling," she said.

The more reliable Labour Force Survey, which the Government normally prefers, showed a rise in the unemployment rate to 5.5 per cent for the three months to October compared with 5.3 per cent in the previous three months.

The number of LFS unemployed rose by 36,000 in that period, the first rise since January and the largest since 1993.

The report also showed that 95,000 manufacturing jobs were axed in the past 12 months, including 22,000 in the transport equipment sector. This included about 15,000 job losses in the car industry, which on Tuesday suffered another blow with Vauxhall's decision to end car output at Luton.

George Buckley, UK economist at Deutsche Bank, said: "All the evidence is pointing to the fact that the labour market is at or near its peak. A claimant count below one million looks not quite the surefire bet it was a few months ago."

John Butler of HSBC said it was still unclear whether the small jobless fall in November showed that the UK economy was slowing or that it was at full employment, which means renewed pay pressure.

Average earnings figures for October, released yesterday, showed a rise in the annual rate of pay increases to 4.2 from 4.1 per cent. Low bonus payments acted as a downward pressure, but the non-bonus measure jumped to 4.4 from 4.2 per cent, implying that basic pay deals are rising.

The Engineering Employers' Federation said latest wage settlements showed the "first significant rise this year". The level rose to 2.8 per cent in November compared with 2.5 per cent in August. David Yeandle, the deputy employment policy director, said: "Engineering companies are having to respond to a combination of a tightening labour market and skills shortages by reaching slightly higher pay settlements."