UK jobless rises at fastest rate in two years

Record public sector job losses pushed up British unemployment at its fastest pace in two years in the three months to July, and the number claiming jobless benefit rose for the sixth straight month in August.

Claimant count unemployment rose by 20,300 last month - a smaller rise than July's 33,700 increase and below forecasts for a jump of 35,000, but continuing a rising trend since February.

The dip below forecast initially prompted some gains for sterling, but the broadly negative numbers brought it back to trade flat compared to before the data.

On the wider ILO measure, which includes people who are looking for work, the number of people without a job rose by 80,000 in the three months to July to 2.51 million, the biggest quarterly rise since August 2009. The jobless rate came in as forecast at 7.9 per cent.

The number of people in employment also fell by 69,000 in the three months to July, the biggest drop since March 2010.

The data show the impact of cuts to reduce a record budget deficit is starting to kick-in in earnest; they also add to the case for the Bank of England to do more to stimulate a flagging economy as turbulence in the UK's main trading partners threatens to tip the nation back into recession.

Britain's deputy prime minister Nick Clegg is expected to say later today that the economic environment has worsened "dramatically" but that the government is looking at ways to boost growth while it presses ahead with its austerity plans. Analysts said they expected unemployment to keep rising.

"Overall, this is a worrying jobs report, which indicates that the economy's persistent weakness, lower business confidence and public sector job cuts are now feeding through to take a significant toll on jobs," said Howard Archer, economist at IHS Global Insight.

"This intensifies pressure on the BoE to undertake further quantitative easing to try and boost the economy," he said.

The Office of National Statistics said the jobless rise and drop in employment were partly driven by the biggest drop in the public sector workforce since records began more than a decade ago.

Public sector employment tumbled by 111,000 between April and June to 6.037 million, less than 10 per cent of this decline was due to temporary workers for the 2011 census finishing their contracts.

Reuters