Rise in jobless smallest in two years

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The Independent Online
UNEMPLOYMENT rose by 7,000 in June, the smallest increase in two years, the Department of Employment said yesterday.

The rise, which was adjusted for normal seasonal changes, took the total to 2,722,700, its highest since August 1987.

The jobless figures were accompanied by mixed news on inflation. Average weekly earnings grew by an underlying 6.5 per cent in the year to May, the slowest since 1967.

Less welcome were Treasury figures showing that the Government had to borrow an unexpectedly large pounds 4.23bn in June to meet the shortfall between recession-hit tax revenues and public spending.

June's increase in unemployment was smaller than City forecasts. It suggests that the rising trend in unemployment continues to slow, despite growing fears that economic recovery is failing to materialise. Unemployment rose on average by 23,300 in each of the three months to June, the smallest figure since the three months to September 1990.

'But it is still much too early to talk about a near-term peak in the level of unemployment', Robert Lind, economist at UBS Phillips & Drew, said.

Unemployment fell in the North-west and East Midlands, but rose in all other regions. As throughout this recession, the South-east saw the largest rise with the proportion of its labour force unemployed at a post-war high. Some 9.6 per cent of the UK workforce is now unemployed.

Total employment fell by 64,000 in the first three months of the year to 25,565,000, the smallest quarterly drop for a year. Employment in service industries rose in the same quarter for the first time since spring 1990.

A rise in overtime working to an 18-month high in May and a three- year peak in the average number of hours worked per week provided more evidence of labour market revival. But the number of vacancies notified to Jobcentres fell by 5,100 in June to 109,500, the lowest since October.

Average earnings growth continued to be depressed as the impact of recession continued. Earnings in manufacturing grew by an underlying 6.5 per cent in the year to May, down from 7.5 per cent in April. Earnings growth would be a percentage point or so lower if overtime payments were excluded.

Average earnings growth has slowed sharply since March as the pay settlements reached in recent months - averaging below 5 per cent - have encompassed more workers and had a greater impact on average earning for the entire workforce.

The amount spent on wages and salaries to produce each unit of factory output - an important measure of international competitiveness - was 2.8 per cent higher in the three months to May than a year earlier, unchanged on April but lower than in previous months. This is comparable with rates in Germany.

Downward pressure on earnings has depressed income tax receipts in recent months, contributing to burgeoning Government borrowing. The public sector borrowing requirement for the first three months of the financial year was pounds 10.8bn, compared to pounds 7bn at the same stage last year.

City economists expect the total for the year to top pounds 30bn, well above the Treasury's pounds 28bn Budget forecast.

(Graphs omitted)

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