Rise in jobless total points to peak in rates

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The Independent Online

Unemployment has risen for the first time in more than a year, according to official figures released yesterday that point to a turn in the labour market and added to speculation that interest rates have peaked.

Unemployment has risen for the first time in more than a year, according to official figures released yesterday that point to a turn in the labour market and added to speculation that interest rates have peaked.

The number of people claiming jobless benefits rose in September and October, while the more respected labour force survey showed a rise in unemployment in September.

The Office for National Statistics said it was the first consecutive monthly rise in the claimant count since the Iraq war although it was early to identify a trend. The number of people claiming benefit rose by 900 in October while revisions converted the 200 fall in September into a 1,600 rise.

Vicky Redwood, at Capital Economics, said: "Although these rises are marginal they seem to confirm that the labour market is no longer tightening."

The number of people who have stopped looking for work hit a fresh all-time high of 7.91 million, prompting calls for government action from the TUC and the Chartered Institute of Personnel and Development.

Meanwhile pay pressures eased as the headline measure of average earnings growth slowed to 3.7 per cent in September from 3.8 per cent in August against forecasts of a slight rise. It leaves the headline rate well adrift of the 4.5 per cent the Bank of England sees as the maximum compatible with its inflation target. Alan Clarke, at BNP Paribas, said: "With the labour market deteriorating, wage growth abating and the surveyors' house-price indicator at a 12-year low, this is further confirmation that rates have peaked at 4.75 per cent."

The Bank's Monetary Policy Committee voted unanimously to keep rates on hold when it met this month, minutes of the two-day meeting showed. They revealed there was no discussion in favour of either raising or cutting rates, leading analysts to forecast rates would remain on hold until there were concrete signs of change in the economy.

The Treasury's monthly survey showed City economists had cut their forecasts for growth this year to 3.2 from 3.3 per cent last month, but raised them for next year to 2.6 from 2.5 per cent. - still below the Treasury's 3.0-3.5 per cent forecast range.

Meanwhile, the Bank's Governor, Mervyn King, played down fears of a crash in the housing market yesterday. "Concern that was there six months ago has diminished, there has been a cooling of the market," Mervyn King said in an interview with the Yorkshire Post.

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