Fears Of Widespread Job Losses Grow As Unemployed Figures Rise Sharply
Thousands of people will lose their jobs over the next two years as the deepening economic downturn forces more companies to cut staff, City experts said yesterday.
After figures revealed the steepest jump in the number of people out of work for two years, economists said the scale and pace of job losses would accelerate sharply in the coming months.
The mounting toll of jobs as economic conditions worsen was highlighted by official figures showing that the number of people claiming unemployment benefits had leapt by 24,400 since February. The number of people receiving state support rose by 9,000 last month, on the heels of a 11,200 jump in April that constituted the biggest increase for two years. This pushed the total to 819,300, up from a low of 794,900 in January.
An alternative measure of unemployment, based on a monthly survey of a section of the population and preferred by ministers who regard it as a closer reflection of labour trends, also jumped. It rose by 38,000 to 1.64 million in the three months to the end of April, the sharpest rise for any three-month period since July 2006. This pushed the proportion of people out of work to 5.3 per cent, up from 5.2 per cent, the first rise since May 2006.
Unemployment rose most sharply in the West Midlands between February and April with 23,000 people losing their jobs. However, employers in the South East continued to hire workers, with employment rising by 23,000 in the three months to April, the official figures show.
In the City, economists said that the trend of rising joblessness was only just beginning. “Given that the slowdown in the economy is expected to continue, unemployment is likely to continue to rise, and at a faster rate,” Philip Shaw, an economist at Investec, a leading City bank, said.
Howard Archer, of Global Insight, an economic consultancy, said that weak growth and slumping business confidence guaranteed thousands more job losses in an increasingly fragile economy. “It seems inevitable that below-trend growth and deteriorating business confidence will exact an increasing toll on the labour market over coming months,” he said.
Yesterday’s gloomy figures reflected the intensifying pressure on key parts of the economy and the global downturn. In the City and the financial and business services sector, companies battered by the credit crunch axed 20,000 jobs in the first quarter of the year alone.
Experian, the credit checking group, suggested that job losses in banking and insurance sectors could rise to 40,000 over the next three years, The struggling manufacturing sector is also in the grip of job cuts, with 11,000 posts lost in the first quarter, and 52,000 over the year to March.
With the Chancellor tightening the screws on government spending, which is now rising at only half the average pace of recent years, the public sector is also suffering job cuts.
Some 20,000 jobs were cut from central and local government and publicly owned businesses in the first three months of the year, pushing the total number to 39,000 in the year to March. Northern Rock, the mortgage bank which was nationalised in February, is set to cut 2,000 jobs by the end of the year.
Economists expect that job losses will mount in other sectors where faltering consumer spending is taking an increasingly heavy toll on companies’ business, including the high street, as well as hotels, bars and restaurants.
The Bank of England’s intelligence from its regional agents showed that businesses’ plans to hire more staff were at their weakest in May since it began compiling these figures in mid-1997. Other surveys have shown falling employment plans among companies in both the manufacturing and services industries. The growth in jobs in the retail, wholesale, hotels and restaurant industries stalled, ending a long run of steady increases in employment since the autumn of 2006.
For now, the total number of people in work is continuing to rise, even alongside rising unemployment, as a growing population swells the workforce. The overall number of people in employment rose by 76,000 in the three months to the end of April, reaching 29.55 million, and setting a record high. But jobs-market experts pointed out that the rate of increase in employment has begun to peter out in recent months. The latest 76,000 increase compared with a much sharper 117,000 rise in the three months to February, and 152,000 in the three months before that.
“The employment figures are still robust, but that’s unlikely to last given the recent falls in surveys of [employers’] hiring intentions,” Vicky Redwood, of Capital Economics, a leading consultancy, said.
The rising unemployment trend will fuel fears that the economy could become locked into a downward spiral. However, economists said that there was at least some consolation as growing joblessness was likely to help persuade the Bank of England to keep interest rates on hold.
Hopes that rates will stay pegged at 5 per cent before being cut later this year or next were also boosted as yesterday’s figures for growth in wages offered reassurance that the Bank’s anxieties over an outbreak of inflation-busting pay increases were not being fulfilled.
The headline anuual growth of average earnings across the economy remained at 3.8 per cent in April, with the rate of increase in pay the same in both the public and the private sectors. Wage growth in the manufacturing sector was even weaker, with a headline rate of 3.5 per cent.