The UK claimant count change in the number of unemployed people claiming benefits recorded better than expected results with only a 20,300 increase in August compared to market expectations for an increase of 35,000 as reported by Office for National Statistics (ONS).
The wider ILO measure of unemployment showed the UK unemployment total rose sharply by 80,000 to hit 2.51 million in July, its biggest rise in two years.
Statistics show that youth unemployment rose by 78,000 to 973,000, and the number of people in employment in the economy fell, by 69,000 to 29.17 million. The total claiming Jobseeker’s Allowance rose, by 20,300 in August to 1.58 million.
The data provides evidence that fiscal austerity measures in the UK are starting to be reflected in the labour market data and could also start to feed into the wider economy raising downside risks further. This reinforces the need for the Bank of England to reintroduce quantitative easing (QE2), most likely in their October Monetary Policy meeting.
However, unlike the first round of QE the British population is not completely ignorant of what it entails and are more aware of the pressures that the economy is under after having witnessed a reduction in discretionary spending on the back of higher taxes, lower benefit payments and higher food/fuel costs as a result of these QE measures.
Sterling rose briefly against the dollar and the euro immediately after data since the number of Britons claiming unemployment benefit rose less than expected but gains in the pound were capped since the chances of QE2 remain elevated.