Fastest rate of unemployment since 1990s
Unemployment is increasing at its fastest rate since the early 1990s, hitting 1.82 million in September.
Official figures show unemployment jumped by 140,000 in the three months to September, its highest point for 11 years. The total number of people claiming benefits has also increased to 980,900, and is set to exceed the one million mark before the end of the year.
In the past week, Virgin Media announced 2,200 job cuts by 2010, BT confirmed it would slash 10,000 positions by March next year and Royal Bank of Scotland revealed 3,000 jobs were on the line worldwide. In addition, an increasing number of firms being wound-up means the unemployment picture is expected to deteriorate significantly going forward.
Vicky Redwood, UK economist for Capital Economics, points out that during 1990s the full impact of the recession on the job market was only properly seen between 24 and 30 months after the start of the recession.
“Much worse is to come – the labour market is a lagging indicator and so does not fully reflect the slowdown in the economy seen so far,” she adds. “We expect the measure to peak in 2010 at around 3.3 million.”
The ONS' UK Labour market statistics show that during October there was fall in the number of people in employment and also in the number of job vacancies. Over the last quarter the number of people in employment has decreased by 99,000 and the number of vacancies has fallen by 40,000 to 589,000.
In contrast, levels of employment in the public sector increased to 5.77 million in June – up by 13,000. Employment was down 29,000 in the private sector over the same time period.
More encouragingly, workforce jobs (including the education, health and public administrating sectors) are up 26,000 over the last quarter and 142,000 from last year.
Perhaps hoping their efforts will keep them in employment, Brits are working longer hours too – on average working 32 hours, up 0.1 in the three months to June 2008. But wage growth is still on the slide with average earnings including bonuses 3.3% higher in the three months to September compared with the same period last year.
Ben Read, managing economist at the Centre for Economics Business Research, says: “With unemployment being a lagging variable we can expect to see further sharp increases over the coming months, particularly given that the worst of the financial crisis has only been seen within the last two months.”
However, Read adds that the labour market is very different now than it was 15 years ago, and the increased level of foreign workers in particular will mean that unemployment measures will react differently.