Unemployment in the UK continued to rise in October, but there was little evidence of inflationary pressure on pay as the growth in average earnings and bonuses fell slightly, according to official figures published on Wednesday.

The claimant count, which measures unemployment as those out of work and claiming benefit, increased by 12,100 to 890,100 in October, the ninth consecutive month it has nudged higher.

The ratcheting up of unemployment, coupled with recent weak prices data, increases the chances that the next move in interest will be down. The Bank of England presents its quarterly inflation report on Wednesday and the jobs data is expected to increase pressure on governor Mervyn King to explain why he remains concerned about inflationary risks.

The monthly increase was larger than expected and reflected the difficulties some companies are facing during a period of weak economic growth.

“The labour market will weaken modestly over the coming months in reaction to extended below-trend growth, and this will contribute to further subdued consumer spending,” said Howard Archer at Global Insight.

The number of people in employment was 28,798 in the three months to September, giving an employment rate of 74.9 per cent, up 0.2 per cent from the previous quarter.

The official measure of unemployment, based on a survey of those out of work and seeking employment, hit a level of 1.43m in the three months to September, down 1,000 on the previous quarter, but up 41,000 on the same period a year ago.

The unemployment rate, as defined by the International Labour Organisation, the United Nations Agency, was unchanged at 4.7 per cent in the three months through September.

For the same quarter, the rise in average earnings, excluding bonuses, was unchanged at 4 per cent. Including bonuses, average earnings fell 0.1 per cent to 4.1 per cent.

Levels of employment have been holding up well considering the economy has been growing below trend for the past five quarters. But there are fears among some economists that the continual rise in the claimant count will soon eat away at consumer confidence.

There was further evidence on Wednesday from Sainsbury’s interims that retailers are experiencing increasing competition as the battle to capture the tightly held cash of cautious shoppers intensifies.

Get alerts on Bank of England when a new story is published

Copyright The Financial Times Limited 2020. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article