Last updated: August 11, 2010 6:58 pm

Job creation hits highest rate in 21 years

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The UK economy created a record number of jobs between April and June, providing further evidence of the robustness of the recovery in that period.

However, a smaller-than-expected fall in the claimant count added to fears that the economy might struggle to maintain momentum.

The number of people employed in the UK surged by 184,000 to 29.02m in the second quarter, the biggest rise since 1989, although about two-thirds of the increase came from part-time work. The employment rate also rose by the most since 1997, the Office for National Statistics said.

The sharp rise in employment came as the economy surged forward with 1.1 per cent growth in the quarter.

The increase in employment came mainly from payroll jobs, while self-employment fell, suggesting that companies were hiring and people who had been forced to start their own businesses were able to find more permanent work.

The unemployment rate fell from 8 per cent in the first quarter to 7.8 per cent in the second quarter, with a 49,000 drop in the numbers of those classed as unemployed – the biggest fall in three years – taking the jobless figure to 2.46m

Earnings growth, while weak at 1.3 per cent a year, was less depressed than the 1.1 per cent rate of increase that economists expected.

“These are numbers that are most unequivocally not consistent with a double-dip recession,” said Neville Hill, economist at Credit Suisse.

But there were some ominous signs, particularly as the government’s plans to slash public spending is likely to lead to the loss of hundreds of thousands of jobs in the next few years.

The number of people claiming Jobseekers’ allowance fell less than expected in July, declining by 3,800 rather than the 17,000 expected, the smallest drop since January. The fall in June was also revised down by about 5,000. For the first few months of this year, the claimant count was dropping by at least 30,000 a month.

Meanwhile, the flows of benefits claimants rose by 12,000 in July, the sharpest increase since February 2009. A rise in the flow of claimants on to jobless registers since the start of this year has come as fewer are ceasing to claim benefits. As a result, the numbers claiming benefits for up to three months and up to six months rose for the first time since April 2009. Consistent with the picture of slowing improvements in jobless claimants, the number of job vacancies has been fairly flat since the end of last year, and public sector vacancies fell in the three months to July.

“The picture likely to emerge over the next year or two is one of increasing tensions between the private sector, where further job gains are likely, and the public sector, where large job cuts are certain,” said Brian Hilliard, economist at SocGen. “Which force will dominate is unclear at this stage.”

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