The new government was faced with stark evidence of the labour market’s fragility after unemployment rose 53,000 to 2.51m in the three months to March, the highest level for more than 15 years.
In a gloomy set of figures released on Wednesday, there were fewer people in work, an increase in redundancies, a fall in job vacancies, a rise in youth and long-term unemployment and a record number of economically inactive people.
The only bright spot was a fall of 27,100 last month in the number of people claiming jobseekers’ allowance to 1.52m, the lowest since April last year. The claimant count has fallen in five of the past six months.
The figures are a headache for Iain Duncan Smith, the new work and pensions secretary, and showed a jobs recovery has yet to begin, even though some economists thought unemployment might be nearing its peak. They also suggested that the jobless total was being held down by workers leaving the workforce or taking part-time jobs instead of full-time ones.
John Philpott, chief economist at the Chartered Institute of Personnel and Development, said the figures were “dire” and a “sober reality check” for the new Conservative-Liberal Democrat government, which faces the task of trying to stimulate growth while cutting the fiscal deficit.
Average weekly earnings, including bonuses, rose 4 per cent compared with last year in the three months to March, up from 2.5 per cent in the three months to February, as workers caught up from very low bonus levels in the depths of the recession.
Excluding bonuses, earnings were up a more modest 1.9 per cent, rising from 1.7 per cent, suggesting that the underlying trend remained subdued.
Unemployment was 8 per cent of the workforce, up 0.2 points on the previous quarter, compared with 9.9 per cent in the US and 10 per cent in the eurozone.
The number of people in jobs fell 76,000 in the quarter to 28.83m – a rate of 72 per cent of the working age population, the lowest since 1996.
Those classed as economically inactive were up 88,000 to 8.17m, the highest since records began in 1971 and more than one in five of the working-age population. Half the increase was a rise in students but others left the workforce to look after families or because they were long-term sick. Vacancies were down 6,000 on the quarter to 475,000, the first fall since last September.
David Kern, chief economist at the British Chambers of Commerce, forecast that unemployment would hit 2.65m towards the end of the year. Vicky Redwood of Capital Economics doubted that private sector hiring would pick up strongly enough to offset looming public sector job and wage cuts.
The number of jobless 16 to 24-year-olds rose 18,000 to 941,000 or 20 per cent of the workforce in that age group. People who said they were working part-time because they could not find a full-time job rose 25,000 to nearly 1.07m.
Unemployment rose everywhere except the Midlands, south-west England and London. Yorkshire and the Humber was the hardest hit, with a rise of 18,000 in the quarter taking its jobless rate to 9.7 per cent of the workforce, the UK’s highest.
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