Jobless in UK reaches three-year high

A rise in Britain's unemployment to a three-year high and a sharp slowdown in public sector pay rises relieved worries among London's business leaders over the need for a rise in interest rates, but added to doubts over the health of the economy.

Official figures published yesterday showed that 77,000 joined the ranks of the unemployed in the three months to April, taking the jobless rate to 5.3 per cent, its highest since September 2002.

The claimant count, the number out of work and drawing benefit, rose by 5,800 to 950,900.

It was the 14th rise in the last 15 months, the UK's Office for National Statistics said.

But the ONS said that, despite the rise in unemployment, the total number in work went up to 28.94 million - the highest since records began in 1971.

Analysts explained the puzzle, saying that inflows of migrant workers and pensioners into the workforce was boosting labour supply.

The average annual pay growth crept up to 4.4 per cent in the three months to April, its highest for a year and up from 4.2 per cent in the prior three months.

The ONS said the increase was driven by City bonuses, and economists focused on the non-bonus figure, which fell 0.1 points to 3.8 per cent.

The slowdown in underlying earnings was driven by a sharp fall in public sector pay growth.

The annual increase in April dropped to 2.7 per cent, the lowest level since April 1998.

John Philpott, the chief economist at the Chartered Institute of Personnel and Development, said public sector workers were now receiving lower pay increases than at any time since the spending "bonanza" began.

"This spells the end of the relatively good times enjoyed by public servants in recent years," he said.

"The overall pay figures also indicate that the imported inflation worrying the Bank of England has still not fed through into pay rises."

- INDEPENDENT