UK jobless rise confirms grim outlook

Important data was released today underlying the weakening British economy. This data showed the biggest one-month jump in unemployment for more than 17 years. The news follows a spate of data over the past two weeks that showed falling house prices, decreasing car sales and rising inflation.

The latest data from the Office for National Statistics demostrated a 0.5% increase in unemployment, to 5.7 per cent, for the three months to the end of August.

This rise is mostly due to the crisis in the financial markets which has forced companies to reduce their workforce. The total number of people employed fell by 122,000 to 29.41m in the second quarter of 2008, the biggest fall since 1993.

“These data are grim,” said Alan Clarke, economist at BNP Paribas. “Employment is falling off a cliff and it is still early days in this slowdown.” He continued by saying that this data suported the need to further reduce interest rates by the Bank of England’s monetary policy committee, despite the sharp rise in CPI.

Michael Saunders, an economist at Citi, said the latest jobs data worried the rapidly decreasing UK housing market. This is because rising unemployment will make it more difficult for homeowners to keep up mortgage payments. Household consumption is at 60% to 65% of UK GDP, a sharp rise in unemployment would only make things worse.

“This is yet another reason for UK house prices to go on falling and for consumer spending to fall off a cliff,” Mr Saunders said. “It’s part of the vicious cycle on the way down.”


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