Last updated: November 14, 2012 6:04 pm

Jobs market resilience starts to fade

The labour market’s recent strength appears to be starting to fade, despite a fall of 49,000 in unemployment to 2.51m in the three months to September, the lowest level for 15 months.

An unexpected rise of 10,100 in the number of people claiming jobseeker’s allowance in October to 1.58m, and a revision of September’s fall to a small increase, suggested the improvement in the jobs market was slowing.

UK inflation graphic

UK inflation graphic

The largest rise was in London, which may indicate an unwinding of the effect of the Olympics.

In a mixed set of data, employment rose by 100,000 to 29.58m in the quarter to September, half the recent rate of increase but up by more than half a million in the past year.

A large part of the rise was driven by an increase in part-time employees, up 49,000 to 8.1m, close to a record high, and temporary workers, up 35,000 to 1.62m.

The drop in unemployment was entirely owing to a 49,000 fall among 16 to 24-year-olds, to 963,000. The number of people unemployed for more than a year was up 12,000 at 894,000.

Martin Beck, UK economist at Capital Economics, said the labour market’s “recent resilience is finally starting to fade” as the Olympics effect weakens.

Economists have been surprised by the strength of the jobs data in recent months – other economic indicators have been much weaker, pointing to low productivity among workers.

Mark Hoban, employment minister, said the figures were good but there was “no room for complacency” and more work was needed to get people into jobs.

But Liam Byrne, shadow work and pensions secretary, said Britain was becoming divided: “Long-term unemployment rose yet again, so did long-term youth unemployment and unemployment in two-thirds of England is higher than it was at the time of the general election.”

Neil Carberry, the CBI’s director for employment and skills, said it was encouraging that the unemployment rate was falling, but “progress on getting people into work is much slower than we saw earlier in the year”.

The jobless rate fell 0.2 points to 7.8 per cent of the workforce, down from a peak of 8.4 per cent at the end of last year. It compares with 7.9 per cent in the US and 11.6 per cent in the eurozone.

The employment rate was up 0.2 percentage points at 71.2 per cent of the workforce, but still below the pre-crisis high of 73 per cent.

Pay rises continued to lag behind inflation. The latest figures for price rises show an annual rate of 2.7 per cent, whereas average earnings including bonuses are only 1.8 per cent higher than a year ago, up 0.1 percentage points on last month’s figure.

The north of England had the biggest falls in unemployment, down 0.7 points in the northwest and Yorkshire and 0.6 points in the northeast and east Midlands. But the northeast had the highest jobless rate at 9.8 per cent of the workforce.

Unemployment rose slightly in Scotland, Northern Ireland, eastern England, London and the southeast.

More than a fifth of the rise in employment was because of people on government supported employment and training schemes, which may help to explain the drop in unemployment in the north.

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