Rise in jobless figures could prompt Bank of England to cut interest rates

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The Independent Online

Unemployment rose last month as businesses cut back on new staff and wage growth slowed, according to the latest figures to paint a downbeat picture of the UK economy.

Unemployment rose last month as businesses cut back on new staff and wage growth slowed, according to the latest figures to paint a downbeat picture of the UK economy.

They came as it emerged one of the two Bank of England economists who had been calling for a rate rise switched sides at this month's meeting of the Monetary Policy Committee.

The pound fell to a seven-month low against the dollar as analysts said the news supported a growing consensus the next move in rates would be down.

The number out of work and claiming benefit rose by 8,100 in April to mark the third successive monthly rise, the Office for National Statistics said yesterday. It has risen almost 26,000 since the start of the year. Colgate became the latest to announce bad news, saying it planned to close a factory in Salford with the loss of 400 jobs.

Although employment rose, the number of vacancies fell sharply among hoteliers and caterers, financial companies, manufacturers and services companies. The only section of the economy to post a significant number of new job opportunities was education, health and public administration, which is largely public sector. Meanwhile, average earnings, excluding and including bonuses, fell by 0.1 percentage points over the three months to March, to 4.1 and 4.6 per cent.

The ONS said employment rose by 87,000 over the three months to March, while the jobless measure fell by 15,000.

The figures come days after a leading employment expert warned the labour market was close to a turning point. The Chartered Institute of Personnel and Development said employers planned to cut staff over the coming 12 months.

Nick Stamenkovic, at RIA Capital Markets, said: "A couple more months of bad news and we'll be talking about ... rate cuts."

Other analysts picked up on the rise in employment as a sign the Bank was in no hurry to cut rates. Howard Archer, at Global Insight, said:"Evidence suggests the labour market is still pretty tight. The Bank will be wary about cutting interest rates for several months to come." The minutes of the MPCmeeting failed to provide clear direction on rates. Paul Tucker, an executive director, dropped his call for a rate rise to join the majority that wanted to leave rates on hold. But Sir Andrew Large, a deputy governor, stuck to his view that demand was outpacing supply and pushing up inflation.

The minutes said: "The two most important risks concerned the outlook for consumption and the recent rise in inflation. There was a risk consumption would not recover as quickly as expected but there was also a risk that past rises in inflation reflected higher demand relative to supply.

"These risks would have opposite implications for inflation ... but it was not yet clear which of the two was more likely to crystallise."

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