U.K. Unemployment Higher Than Expected

Three-month rate highest in 16 years

Jobless claims in the U.K. rose more than expected in February, and the three-month unemployment rate stayed at its highest in 16 years, showing that Britain has a way to go before finding its way out of its economic woes.

Bloomberg reported Wednesday that data from the Office for National Statistics indicated that claims for unemployment benefits rose by 7,200 from January to 1.612 million, the twelfth increase in a row. A Bloomberg survey of economists had resulted in a median forecast of 5,000 jobless claims. Unemployment stood at 8.4% for the three months through January–the most it has been since 1996.

The rise in the rate of claims may push criticism that cuts in government spending by Prime Minister David Cameron are too aggressive as he attempts to reduce Britain’s deficit. Consumer confidence is sagging, based in part on fears of job loss, and the country’s economy contracted in Q4 of 2011.

Prior to the release of Wednesday’s data, Howard Archer, chief European economist at IHS Global Insight in London, was quoted saying, “We suspect that unemployment is still headed higher through the coming months as economic activity remains limited. Business confidence is likely to remain fragile, which will limit employment in the private sector as substantial job cuts occur in the public sector.”

Even though there were signs that the economy in the U.K. might be improving in the current quarter, additional job cuts are coming from Royal Bank of Scotland Group and Lloyds Banking Group. The number of public sector employees fell as well, according to other data from the statistics office, and pay growth slowed too, despite rising inflation.

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