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UPDATE 2-UK jobless rate rises to highest since 1996

Published 09/16/2009, 06:25 AM
Updated 09/16/2009, 06:27 AM
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* ILO jobless rate rises to 7.9 pct, highest since Nov 1996

* Weakest growth in earnings ex-bonuses on record

* Unemployment set to continue climbing ahead of election

By Fiona Shaikh and Christina Fincher

LONDON, Sept 16 (Reuters) - Britain's jobless rate climbed to its highest in almost 13 years in July and while there were signs the pace of layoffs may be slowing, analysts cautioned dole queues could lengthen for some time yet.

The Office for National Statistics said the number of Britons out of work on the internationally-comparable ILO measure rose by 210,000 to 2.47 million in the three months to July. That took the jobless rate up to 7.9 percent, the highest since November 1996.

Unemployment is a lagging indicator and both analysts and policymakers have warned it would continue to rise even as the economy comes out of the worst recession in decades.

Some expect the jobless total to hit three million next year, bad timing for Prime Minister Gordon Brown's Labour government which must call an election by June.

"The numbers continue to point to a weak labour market, albeit one that, at the margin, is getting less weak," said Neville Hill, economist at Credit Suisse.

The number of people claiming unemployment benefit rose by 24,400 to 1.607 million in August, the highest since May 1997. That was roughly the same as in July but less than a quarter of the increases seen at the start of this year.

"It does look as though the rate of joblessness will not reach as high a peak as we thought it might have done at the start of the year even though it will remain at high levels for some time to come," said Philip Shaw, economist at Investec.

For graphic, click on http://graphics.thomsonreuters.com/099/UK_CLMILO0909.gif

SUBDUED WAGE GROWTH

Overall, the figures were no worse than expected and the pound ticked higher. However, there were signs that a slowing in the pace of job cuts may have come at the expense of workers' pay packets.

Average earnings growth including bonuses eased to 1.7 percent in the three months to July from 2.5 percent in the three months to June. In July alone, pay growth fell to 1 percent from 1.9 percent in June.

Earnings growth excluding bonuses fell to 2.2 percent in the three-month period, the lowest since records began in 2001.

"Most worrying is the speed with which pay growth is now slowing," said Vicky Redwood, economist at Capital Economics.

"As Mervyn King highlighted yesterday, even if the recession is technically over, it will continue to feel like one for many people for a long time yet."

Bank of England Governor Mervyn King on Tuesday sounded a cautious note about the strength of any recovery in Britain, indicating that monetary policy would remain loose for some time to come.

On Tuesday, Prime Minister Brown told a Trades Union Congress conference that public spending will need to be cut to tackle Britain's soaring debt. Unions claimed cuts will prolong the recession and increase unemployment. (Editing by Andy Bruce)

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