Jobless claims rise at twice expected rate

The UK jobs market continued to soften in March as the number of people claiming unemployment benefits rose more than expected, official figures showed today.

The Office for National Statistics said the claimant count rose by 12,600 - double City expectations - to 937,600, its highest level since July 2003.

The claimant count rate was 3%, virtually unchanged from the previous month, but up 0.3 percentage points from a year earlier. February's monthly rise in claimant count was revised up to 19,900 from 14,600, the biggest since December 1992.

Jobless claims have now risen for 13 of the past 14 months, the longest period of increases since the UK pulled out of recession in 1992, when John Major was prime minister.

Despite the unexpectedly large rise in February's claimant count, Britain's job market remains strong compared with those in other large EU countries such as France and Germany.

Margaret Hodge, the minister of state for employment and welfare reform, said: "The number of people working is now higher than it has ever been. Combined with low redundancies and nearly 600,000 vacancies in the economy, the UK labour market is in a position that most would envy."

Average earnings in the three months to February were 4.2% higher than a year earlier, compared with City forecasts of a 3.6% rise. But excluding bonuses the rate was 3.8%, unchanged from the three months to January.

That should reassure the Bank of England, which has expressed concern that higher energy prices could push up wage bills.

Howard Archer of Global Insight said: "Underlying average earnings remained reassuringly muted, and there still seem to be very few signs at the moment that high energy prices are feeding through to push up wages. Indeed, the latest pay settlements data has been largely benign, although admittedly the latest sharp rises in utility prices have yet to impact."

On the government's preferred International Labour Organisation measure of unemployment, the jobless rate was 5.1% in the three months to February compared with City forecasts of 5%. The unemployment level was 1.56 million in the period, up 30,000 from the three months to last November and up 120,000 from a year earlier.

Analysts described today's figures as a mixed bag that will do little to shift the Bank of England from its current policy of keeping rates at 4.5%.

"The mixed labour market data do little to clarify the outlook for consumer spending and inflation, and reinforce the impression that interest rates will remain on hold for several more months to come," Mr Archer said.