Unemployment continues to grow

15-11-2006

Unemployment continues to grow
Unemployment rose by 0.1 per cent in the three months to September to its highest level for nearly five years, government figures show.

The Office of National Statistics (ONS) said that the number of people out of work had reached 5.6 per cent, the equivalent of 1.71 million people.

Although 27,000 more people had become unemployed during the third quarter of 2006 the number of people in employment over the same period rose by 56,000, largely thanks to the influx of foreign workers from newly-acceded EU members from the former Soviet bloc.

"Employment is up 175,000 this year for people aged over 50, the number on incapacity benefits is at its lowest since 2000, and the number on lone parent benefits is down by nearly a quarter since 1997. But we can do more," Jim Murphy, minister of state for employment and welfare reform, commented.

"That is why our welfare reform bill is so important. It will help us to reduce the numbers on incapacity benefits by one million, increase the employment of lone parents by 300,000 and the employment of older workers by one million."

Howard Archer of research firm Global Insight said that in addition to the influx of migrant workers, other factors increasing the overall employment rate included higher numbers of older people and previously economically inactive people working.

He also drew attention to the 0.1 per cent fall in average earnings, excluding bonuses, in September compared to August, saying that the Bank of England would welcome "muted earnings growth" because it meant inflationary pressures would be eased in the short-term.

Mr Archer warned that increases in overall inflation could result in wage increases at the beginning of next year having a substantial impact on overall interest rates, potentially creating the need for an interest rate rise in the first quarter of 2007.

But he concluded by downplaying this threat, saying that "the still increasing slack in the labour market will help to contain wages growth and dilute the need for any furtehr interest rate hikes".


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