Jobless surge challenges Bank's view on economy
By Josephine Moulds (Filed: 16/03/2006)
telegraph.co.uk
The number of Britons out of work and claiming benefits rose in February by the sharpest monthly rise since the last recession.
Growth in earnings also slowed, painting a grim picture of the labour market that clashes with the Bank of England's view.
Data from the Office for National Statistics show 14,600 more people claimed benefits last month, bringing the total to 919,700 - the biggest monthly rise since December 1992. The number of jobless rose by 37,000 to 1.53m between November and January.
Investec economist Philip Shaw said: "This does put into question the monetary policy committee's optimism over the economy." Last month, rates were pegged at 4.5pc in the belief the economy would gradually strengthen.
Average earnings in the three months to January were 3.5pc higher than a year earlier, much weaker than the 3.9pc predicted by analysts.
Workers in the private sector saw salaries grow by 2.8pc year-on-year, against 3.9pc in December. Public sector workers' pay packages increased on average by 4.1pc from the previous year, outstripping private sector pay for the fifth year in a row.
Subdued earnings growth was partly due to changes in the timing of bonus payments. Many firms that pay bonuses in January have not paid them yet and analysts say the figures may rebound sharply with the next set of data. That said, earnings growth excluding bonuses was weak, which may ease Bank concerns that high energy prices are feeding through to inflationary pay packages.
Mr Shaw said: "There's very little in the way of higher pay pressures, and therefore fears that higher energy prices would lead to higher pay deals are likely to be unfounded."
Economists say these bleak figures may prompt the Bank to cut rates. Howard Archer, economist at Global Insight, said: "The combination of rising unemployment, falling employment and muted earnings growth is hardly supportive for consumer spending or, for that matter, extended sharp house price increases.'' |
