Unemployment falls but benefit claimants rise

Crowd of workers

The health of the UK economy has been given a reality check after the number of people claiming Jobseekers' Allowance rose unexpectedly in January.

The latest figures reveal that jobless benefit claims rose by 23,500 to 1.64 million for the three months to December after dipping over the previous two months. This is the largest increase since July last year and has knocked economists' expectations of a 10,000 drop.

However, total unemployment continued to decline to 2.46 million, down 3,000 on the figure for the previous month. This left the rate of unemployment unchanged at 7.8%.

Meanwhile, the number of 16-to-24 year olds out of work also fell back to 923,000 from 936,000 the previous month.

Howard Archer, chief UK and European economist at IHS Global Insight, says: "The economy is just not strong enough at this stage to prevent further job losses and the fall in unemployment late in 2009 had masked the fact that full-time employment was still falling appreciably.

"Yes, the worst of the job losses are behind us; and, yes, overall job losses have been less than feared due to employer and worker flexibility, but it is unrealistic to expect the number of unemployed to have peaked when the economy is still barely growing after extended, deep recession."

And Nigel Meager, director of the Institute for Employment Studies, agrees that more bad news is on the horizon. He says: "Recent reports suggest we can expect bad news, with large-scale redundancies later this year.

"So far the loss of jobs in the private sector during the recession has been partly offset by growth in public sector employment, which will go into reverse in the coming months."

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