Pressure for another big fiscal stimulus in the budget next month is set to grow after figures today showing that unemployment across the UK has climbed to more than two million for the first time since 1997.
Figures out today from the Office for National Statistics show claimant count unemployment rose by 138,400 last month - well above analysts' forecasts of a rise of 85,000 and the biggest monthly increase since comparable records began in 1971.
It brought forecasts this morning that unemployment will rise to a peak of 3.3 million on the International Labour Organisation measure late next year, equivalent to around 10.5 per cent of the workforce.
The ILO measure rose by 165,000 in the three months to January to 2.029 million – the highest since 1997. Unemployment on the ILO rate is now 6.5 per cent. And the claimant count rate spiked up to a 10 year high of 4.3 per cent, from 3.9 per cent in January. January's increase, just to add to the misery, was revised sharply upwards to 93,000.
The worse than expected unemployment figures will reinforce fears that Britain’s economic downturn could be mor
e painful than previously thought.
And they come hard on the heels of a leaked assessment by the International Monetary Fund that Britain will take longer to recover from the current recession than any other major economy. It warns that the UK will have one of the most severe downturns this year and will be the only major economy still to be shrinking next year - this despite a near 25 per cent fall in sterling which should help exporters.
The figures, together with the IMF warning, knocked the stock market down this morning while markets elsewhere rose on encouraging overnight news from the US housing market.
The report is a direct challenge to the UK government's forecast of a recovery setting in during the second half of this year and that it will be growing again in 2010 and will intensify pressure for further measures to boost the economy in the budget.
Said Global Insight economist Howard Archer this morning, "The unemployment data are truly awful, heightening fears about the potential depth and length of the recession.
"Unemployment smashed through the 2 million barrier with ease and it seems set to head up towards 3 million pretty rapidly over the coming months as the economy contracts sharply and struggling businesses look to contain their costs.
"Reports of companies laying off workers are prevalent, while an increasing number of companies are folding as the deep recession increasingly bites.
"With the economy seemingly set to contract through 2009 and very possibly beyond before starting to recover gradually, we expect unemployment to rise to a peak of 3.3 million on the ILO measure around late-2010/early-2011. This would give a peak unemployment rate of around 10.5%."
For February, the number of people getting jobseeker's allowance added a record 138,400 to reach 1.39 million. There are now 10 jobseekers for every vacancy advertised in UK jobcentres, the TUC claimed earlier this week.
Average earnings including bonuses in the three months to January grew an annual 1.8 percent, the weakest since records began in 1991. The single month annual rate actually fell by 0.2 percent, the first fall on record.
Earlier this month the British Chambers of Commerce made a gloomy prediction that by the second half of next year unemployment across the UK would reach 3.2 million, which is slightly more than 10% of the workforce. Last month, business body the CBI predicted there would be 2.9 million people unemployed by the end of 2009, breaching the three million mark in 2010.
