Unemployment rises to 2.22 million

Box on desk

A further 244,000 people found themselves out of work in the first three months of 2009, bringing the total unemployment figure to 2.22 million.

The number of people out of work is now at its highest level since 1996 - and unemployment is  expected to hit three million or more by the end of 2009. However, the government argues that between January to March, the vast majority of people (29.2 million) were in work.

The labour market data, which was due to be published on 13 May but came out in advance after an “accidental early release", also shows the jobless rate rose from 6.7% to 7.1% - the largest rise since 1981.

The number of vacancies has diminished, and the number of workforce jobs has fallen. 

People claiming unemployment benefits, meanwhile, rose 57,100 to 1.51 million in April. This is despite almost 300,000 people leaving the claimant count during the month. And, worryingly, average wages took a hit - the first fall since 1991. 

Earnings including bonuses were 0.4% lower in the first three months of 2009 compared to the same period of 2008. This is a serious concern, as it poses the risk that the UK could enter a prolonged period of deflation. Economists warn that if deflation becomes entrenched in wages then the recession could turn into a depression.

"With unemployment set to rise much further - we still think that it will reach 3.5 million - the downward pressure on pay is only set to intensify," says Vicky Redwood, UK economist at Capital Economics.

However, Tony McNulty, minister for employment, says the government will continue to work to help people back into work. Last monht's Budget saw £3.1 billion of funding set aside to be invested in creating “opportunities” for Britain’s unemployed, while a further £1 billion is to be targeted at young people who become trapped in long-term unemployment.

Redwood says the rise in unemployment was smaller than expected - but warns this does not indicate that unemployment levels are starting to stall.

"Signs of green shoots have even begun to creep into the particularly lagging labour market data," she says. "However, there was still more bad news than good in the latest set of figures."

On the plus side, the pace of the claimant count has eased for two months in a row, with the 57,100 rise in April the smallest since October, says Redwood.

However, she adds that it isn't unusual for claimant counts to be higher at the start of the recession, with unemployment continuing to rise for several years.