The number of Britons out of work looks set to top the two million mark for the first time in over a decade, official data is forecast to show on Wednesday, as a deepening recession forces employers to wield the axe.
The last time the internationally comparable ILO jobless measure stood at two million was in mid-1997, just after the Labor government swept to power. The consensus of analysts polled by Reuters is for the unemployment rate to have jumped to 6.5% in January, from 6.3 in December, the highest rate in more than a decade.
The number of people claiming unemployment benefit is forecast to have leapt 85,000 in February, the biggest monthly increase since 1991. Job cut announcements have come thick and fast in recent months, spreading from areas particularly exposed to the credit crunch -- such as construction and banking -- to all parts of the economy.
“We’ve had a spate of announced job cuts but much of this has yet to show up in the official data,” said Alan Clarke, an economist at BNP Paribas. “This time we could see quite a sharp deterioration.”
Worse is to come. The Confederation of British Industry reckons nearly three million Britons will be without work by 2010, a view validated by the Bank of England’s labor market expert David Blanchflower. Employment is a lagging economic indicator as it takes time for employers to respond to falling demand. Britain’s economy contracted at the end of last year as its fastest rate since the early 1980s.
Many economists say the economy will shrink 3% this year, which would be the worst performance since World War Two.
Minutes to the Bank’s March 5 policy meeting, also due for release on Wednesday, could shed light on its decision to embark on quantitative easing with such gusto in response to Britain’s economic malaise. The Bank’s decision to buy gilts with £75 billion of newly created money was more aggressive than many had been expecting and sent gilt yields to record lows.
“The minutes will hopefully explain why the Committee chose £75 billion ($105 billion) as the exact amount of quantitative easing, as well as why it chose to undertake the majority of that easing through the purchases of gilts,” said Vicky Redwood at Capital Economics.
The Bank cut interest rates to a record low of 0.5% this month, a decision that is expected to have been backed by all nine committee members. Bank Governor Mervyn King has indicated that rates are unlikely to go any lower, leaving the focus for further action firmly on unconventional tools. (Reuters)