Stagflation in ‘Great’ Britain intensifies as the Economy stagnates, Inflation and Joblessness rises

BritainU.K. April Unemployment Claims Rise

U.K. unemployment claims rose in April at the fastest pace since January 2010, underlining the fragility of the economic recovery as government spending cuts and accelerating inflation sap consumer confidence.

Jobless benefit claims increased by 12,400 from March to 1.47 million, the Office for National Statistics said today in London. The median forecast of 24 economists in a Bloomberg News Survey was for no change. Unemployment measured by International Labour Organization methods fell by 36,000 to 2.46 million people in the quarter through March from the previous quarter.

Prime Minister David Cameron is relying on private companies to create jobs as his coalition government eliminates more than 300,000 public-sector posts to tackle the budget deficit. The economy stagnated in the six months through March and Bank of England Governor Mervyn King this week said activity remains weak.

“We suspect that likely below-trend growth will mean that the private sector will be unable to fully compensate for the increasing job losses in the public sector that will result from the fiscal squeeze that is now really kicking in,” Howard Archer, an economist at IHS Global Insight in London, said before the announcement.

The statistics office said the increase in the claimant count was partly driven by rule changes that shift mainly women from lone-parent benefits onto the unemployment roll.
Comparisons

The U.K. unemployment rate based on ILO standards was at 7.7 percent in the three months through March, down from 7.9 percent in the quarter through December. That compares with 9.9 percent in the euro region, 9 percent in the U.S. and 4.6 percent in Japan, the statistics office said.

The increase in the number of people claiming jobless benefits last month put the claimant-count rate at 4.6 percent, the first increase since September 2009. Claims rose by 6,400 in March instead of the 700 increase initially reported.

Today’s figures are likely to fuel the political debate over the pace of deficit reduction after the German and French economies grew faster than the U.K. in the first quarter.

The Bank of England last week cut its growth forecast for the U.K. this year as King warned that pressure on incomes from government spending cuts and soaring inflation will hit the economy hard.

The central bank nevertheless signalled that it may need to raise the key interest rate from a record low to control inflation, which jumped to 2 1/2-year-high of 4.5 percent in April and is forecast to reach 5 percent in coming months.

Today’s report showed that pay growth accelerated to 2.3 percent in the quarter through March from 2.1 percent in the period through February. Pay growth excluding bonuses slowed to 2.1 percent from 2.2 percent.

Source: www.bloomberg.com

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