UK jobs hit by global recession

by Editor 5/15/2008 4:20:00 PM

The British Office for National Statistics reports that the number of people claiming unemployment has risen by 14,000 to 1.61 million in the first three months of 2008. In April, there were 7,200 new people claiming job seeker’s benefits. This is the biggest unemployment rise since April 2006.

Similarly, an analysis by the Evening Standard indicates that the credit crunch is leaving more than 300 people without a job in London each week and the International Monetary Fund (IMF) predicts that the economy will suffer a sharp slowdown to 1.6% both this year and the next.

The main factors behind this, says the IMF, are the contraction of the financial sector, the weakening housing market, and the effect of weaker growth in the U.S. and Europe on UK exports.

Unicredit analyst Chiara Corsa says: “The figures are a clear sign that the job market is losing momentum in the U.K. and it will remain weak for the rest of 2008 and the beginning of next year. I expect an unemployment rate rise of 3% over the coming months. The job market has not hit rock bottom yet.”

“Conditions in the U.K. labour market are clearly softer than six months ago and softer than at this time of year for several years,” says John Philpott, chief economist at the Chartered Institute of Personnel and Development, recommending a further cut in interest rates to avoid market recession and deal with a possible “wave of job cuts.”

With the inflation, unemployment rate and possible drop in consumer spending in mind, however, the Bank of England is not very likely to cut interest rates.

“Overall, the trend in unemployment seems to have turned and the recent rises are likely to be just the tip of the iceberg. The upside risks to inflation have undoubtedly increased,” says Vicky Redwood, an economist at Capital Economics.

In the wake of the reports, Prime Minister Gordon Brown has pledged to support the job market, saying: “We do not shirk from the necessity of intervening to protect and safeguard jobs in the economy.”

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