News

Interest Rates Cut - In The Bag

Unemployment rose for a fifth monthin June, givingthe Bank of England fresh reason to cut interest rates in August, Writes Jane Padgham

Jobseeker's allowance claimants rose 8800 to 864,900,marking the longest run of job losses since the recession hit in 1992.

The unemployment rate nudged up from 2.7% to 2.8%. More than50,000 people have lost their jobs since the start of the year, with high profileredundancies at MG Rover and Sony.

An alternative, International Labour Organisation measure showed the number of people in employment fell 72,000 in the three months to may.

Trades Union Congress general secretary Brendan Barber said the deteriorating employment situation was mainly hitting the young.

"In the medium term, we need government and indusrty to invest more in training for young people. But there is now an urgent need for the Bank of England to cut interest rates."

Rob Carnell, economist at ING, said "This data, which builds on top of housing weakness and the slowdown in spending on the High Street, suggests an August rate cut must be almost in the bag."

Meanwhile, average earnings growth unexpectedly eased to 4.1% in the three months to May from 4.6% in the previous three months, below the 4.5% ceiling the Bank deems compatible with its 2% inflation target.

But the slowdown disguised a sharp pick-up in public sector wage growth to 5.6% due to bonuses for transport and communications workers.