London - The sharpest rise in jobless claims in over two
years is adding pressure on the government to boost the faltering economy at a
time when the country struggles to regain confidence after riots hit major
The number of people claiming jobless benefit rose by 37 100
last month, the Office for National Statistics said on Wednesday, the largest
jump since May 2009 and well above economists' forecast of a rise by 20 000.
Some of the rise was still due to a change in benefit rules,
though this could not explain all of the increase, the ONS said.
The labour market has been surprisingly robust during the
financial crisis and employment has risen despite a sluggish economic recovery.
However, surveys have indicated that firms are scaling back
hiring plans, raising doubts about the ability of private companies to make up
for public sector job losses caused by the government's spending cuts, aimed at
erasing the budget deficit.
Chancellor George Osborne has firmly rejected all calls to
slow his austerity drive, pledging to push on with supply side reforms to
support businesses and job creation.
On Wednesday, the government announced 11 more low tax,
light regulation enterprise zones which could create up to 30,000 jobs by the
time of the next election due in 2015.
With room for more government spending limited, any boost
for the economy is likely to come from the Bank of England, where more
policymakers considered fresh asset purchases and all calls for higher rates
Rising unemployment is likely to further dent shaky consumer
morale, already hit by high inflation, low wage rises and recent riots in major
The ONS said the number of people without a job on the wider
ILO measure rose by 38 000 in the three months to June to 2.494 million and the
jobless rate unexpectedly rose to 7.9%, compared with forecasts for an
unchanged reading of 7.7%.
"The labour market data is unambiguously bad,"
said Tom Vosa, economist at National Australia Bank.
Some of the rise in the second quarter could have been
caused by factors such as supply-chain disruptions after the earthquake and
tsunami in Japan, which was partly behind a slowdown in GDP growth to a meagre
"But if we don't see a reversal of that trend, we are
looking at unemployment going up to 8% - 9% on the ILO measure by the end of
next year," Vosa said.
Employment rose by only 25 000 in the three months to June,
the slowest rise since the three months to December 2010 and the number of
vacancies fell to the lowest level in nearly 2 years.
Average weekly earnings growth including bonuses rose 2.6%
in the three months to June compared to last year, a faster rate than the 2.3%
analysts had forecast. Excluding bonuses, however, pay only increased by 2.2%.
Wage increases remain well below inflation, which is running
above 4%, providing little relief for households' squeezed budgets.