UK jobless claims increase

UK jobless claims rose at the fastest pace in more than a year and job creation slowed, suggesting the labour market is succumbing to a fragile economic outlook.

Jobless-benefit claims increased 10,100 to 1.58 million in October, the most since September last year, the Office for National Statistics said today in London.

Unemployment may begin rising in coming months as companies respond to a weak outlook by freezing hiring or cutting payrolls.

Bank of England Governor Mervyn King said today the UK economy may shrink in the current quarter and signalled policy makers are ready to resume stimulus if needed by saying they had not lost faith in quantitative easing as a policy instrument.

"Because growth is still quite sluggish there will be sluggish employment growth, and the unemployment rate may edge up a bit," said Ross Walker, an economist at Royal Bank of Scotland group in London.

The pound pared its advance against the dollar after the central bank cut its growth outlook in its quarterly Inflation Report and was trading at $1.5868 as of 10.58am in London, little changed on the day.

International Labour Organisation (ILO) unemployment between July and September fell 49,000 to 2.51 million, though figures prepared on an experimental basis showed an increase of 53,000 in September alone, the statistics office said.

Long-term unemployment continued to rise.

There are "really positive signs" in today's data, though "I don't think any of us are complacent about the scale of the challenges that we face," UK employment minister Mark Hoban said.

The jobless rate fell to 7.8 per cent from 7.9 per cent in the three months through August.

The rise in jobless claims last month left the claims rate at 4.8 per cent.

In September, jobless claims rose by 800 instead of the 4,000 drop originally reported. It was the first back-to-back increase in claims since June and followed eight months of decline.

Bloomberg