The latest unemployment report for July 2012 from the UK indicated a drop in the jobless claims. The unemployment rate, which was previously at 8.2% declined to 8% while the number of unemployed was at 2.56 million, lower by 46,000 in the three months up to the month of June. During the month of July, the number of unemployment claims droped by 5,900 to 1.59 million July. On the same note, the number of part-time workers reached a record high of 16,00 during the three months up to June.
Evident from its report, the Olympic Games seems to have given the UK’s job market a boost which underlined the resilient labour markets amidst the recession.
The unemployment report was released by the Office for National Statistics few minutes ago. Going further into the unemployment numbers, the ONS reported that people in the age group of 16 – 24 noticed a decline in the number of unemployed at 1.01 million, down by 4000 since March 2012.
The latest unemployment figures was a positive news for the UK’s ailing economy that has been battered by slowdown in manufacturing and exports while experiencing the longest double dip recession since last year.
London recorded the highest number of job creations clearly attributing to the London 2012 Olympic Games.
BoE in its forecast saw not much of growth in the UK’s economy well into the end of the year. Analysts believe that the UK’s economy could shrink even further. However, the fact that unemployment rate has reduced during such a time is a riddle for everyone. The government has been pinning its hopes on the private sector to create newer jobs to make up for the 700k job losses it expects to see as part of the government’s spending cuts.
While the drop in unemployment might give consumer spending a boost, the ONS wage data showed that the 2.6% inflation which spiked unexpectedly will outpace the increase in earnings which could prove to be a dent to the consumer’s spending.
The BoE has kept the interest rates at historical lows of 0.5% with Sir Mervyn King commenting that any further reduction in the interest rates could prove to be negative to the economy. Britain is currently battling recession which has seen its GDP contract by 0.5% according to the latest revised numbers.
The EURGBP pair dropped below the 0.7860 mark after the unemployment report was released. By and large markets were expecting the unemployment rate to remain unchanged at 8.1%. Against the USD, the British Pound was trading upwards at 1.57.