U.K. unemployment rose to the highest rate in 16 years in the quarter through November, deepening concerns Britain is heading for another recession as turmoil in the euro area damps the global economic outlook.
The unemployment rate based on International Labour Organization methods rose to 8.4 percent, the highest since January 1996, from 8.1 percent in the three months through August, the Office for National Statistics said today in London. The number of people claiming jobless benefits rose for a 10th month to 1.6 million, the most since January 2010.
The World Bank cut its global growth forecast by the most in three years today, saying the economy has entered a “dangerous period.” In the U.K., the impact from the euro-area crisis is being compounded by Prime Minister David Cameron’s budget cuts, which are damping consumer confidence and will lead to about 700,000 job cuts through early 2017.
“The outlook for the labor market is pretty dismal,” said Nida Ali, economic adviser to the Ernst & Young ITEM Club. She expects unemployment to rise to 9.3 percent in a year and the number could be even higher “if one of the more negative outcomes of the euro-zone crisis were to materialize.”
ITEM Club said Jan. 16 that Britain has slipped back into a recession and Europe’s inability to end the debt crisis has had a “debilitating effect” on the U.K. Royal Bank of Scotland Group Plc said last week it will close its equities and corporate-finance units, cutting as many as 3,500 jobs, while Premier Foods Plc, the maker of Hovis bread, plans to eliminate 600 positions.
Crisis Trigger
The world economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, the World Bank said. The U.S. growth outlook was cut to 2.2 percent from 2.9 percent. It said that turmoil in Europe still has the potential to trigger a global financial crisis reminiscent of 2008.
China, the world’s second-biggest economy, reported today that foreign direct investment declined in December by the most since July 2009, underscoring the World Bank’s warning that developing economies should “prepare for the worst.” Home prices fell in 52 of 70 cities in December from November, statistics bureau data showed.
In the U.S., producer prices unexpectedly fell 0.1 percent in December from the previous month. Economists projected a 0.1 percent gain, according to the median estimate in a Bloomberg News survey.
IMF Boost
“Despite the significant measures that have been taken, the possibility of a further escalation of the crisis in Europe cannot be ruled out,” the World Bank said. The International Monetary Fund is proposing to raise its lending capacity by $500 billion to insulate the global economy against any worsening of Europe’s crisis, according to a person familiar with the discussions.
Europe’s Stoxx 600 Index fell 0.5 percent as of 2:04 p.m. in London, while the FTSE 100 Index declined 0.3 percent. The pound gained 0.1 percent against the dollar to $1.5356.
The U.K. data showed that unemployment rose 118,000 in the quarter through November to 2.69 million, the highest since 1994. Jobless claims increased 1,200 in December, less than the 7,000 increase forecast by economists in a Bloomberg survey.
“This a huge priority for us,” Employment Minister Chris Grayling told BBC television. “Unemployment is much too high. There’s no question about that. We are taking what measures we can in extraordinarily difficult times.”
While the U.K. economy grew at the fastest pace in a year in the third quarter, the Bank of England has said expansion will weaken in the following quarters. The central bank is in the final month of a 75 billion-pound ($115 billion) round of bond purchases to boost growth, and economists at Citigroup Inc. and Nomura International Plc expect a further expansion of stimulus next month.
“The economy is not growing much and if you extrapolate that over the next six months, jobs are going to be pretty hard to find,” said Peter Dixon, an economist at Commerzbank AG in London. “Unemployment could become one of the main economic and political issues this year and may well be one of the triggers for more stimulus from the Bank of England.”
–With assistance from Mark Evans and Harumi Ichikura in London. Editors: Fergal O’Brien, Eddie Buckle
To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
The unemployment rate based on International Labour Organization methods rose to 8.4 percent, the highest since January 1996, from 8.1 percent in the three months through August, the Office for National Statistics said today in London. The number of people claiming jobless benefits rose for a 10th month to 1.6 million, the most since January 2010.
The World Bank cut its global growth forecast by the most in three years today, saying the economy has entered a “dangerous period.” In the U.K., the impact from the euro-area crisis is being compounded by Prime Minister David Cameron’s budget cuts, which are damping consumer confidence and will lead to about 700,000 job cuts through early 2017.
“The outlook for the labor market is pretty dismal,” said Nida Ali, economic adviser to the Ernst & Young ITEM Club. She expects unemployment to rise to 9.3 percent in a year and the number could be even higher “if one of the more negative outcomes of the euro-zone crisis were to materialize.”
ITEM Club said Jan. 16 that Britain has slipped back into a recession and Europe’s inability to end the debt crisis has had a “debilitating effect” on the U.K. Royal Bank of Scotland Group Plc said last week it will close its equities and corporate-finance units, cutting as many as 3,500 jobs, while Premier Foods Plc, the maker of Hovis bread, plans to eliminate 600 positions.
Crisis Trigger
The world economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, the World Bank said. The U.S. growth outlook was cut to 2.2 percent from 2.9 percent. It said that turmoil in Europe still has the potential to trigger a global financial crisis reminiscent of 2008.
China, the world’s second-biggest economy, reported today that foreign direct investment declined in December by the most since July 2009, underscoring the World Bank’s warning that developing economies should “prepare for the worst.” Home prices fell in 52 of 70 cities in December from November, statistics bureau data showed.
In the U.S., producer prices unexpectedly fell 0.1 percent in December from the previous month. Economists projected a 0.1 percent gain, according to the median estimate in a Bloomberg News survey.
IMF Boost
“Despite the significant measures that have been taken, the possibility of a further escalation of the crisis in Europe cannot be ruled out,” the World Bank said. The International Monetary Fund is proposing to raise its lending capacity by $500 billion to insulate the global economy against any worsening of Europe’s crisis, according to a person familiar with the discussions.
Europe’s Stoxx 600 Index fell 0.5 percent as of 2:04 p.m. in London, while the FTSE 100 Index declined 0.3 percent. The pound gained 0.1 percent against the dollar to $1.5356.
The U.K. data showed that unemployment rose 118,000 in the quarter through November to 2.69 million, the highest since 1994. Jobless claims increased 1,200 in December, less than the 7,000 increase forecast by economists in a Bloomberg survey.
“This a huge priority for us,” Employment Minister Chris Grayling told BBC television. “Unemployment is much too high. There’s no question about that. We are taking what measures we can in extraordinarily difficult times.”
While the U.K. economy grew at the fastest pace in a year in the third quarter, the Bank of England has said expansion will weaken in the following quarters. The central bank is in the final month of a 75 billion-pound ($115 billion) round of bond purchases to boost growth, and economists at Citigroup Inc. and Nomura International Plc expect a further expansion of stimulus next month.
“The economy is not growing much and if you extrapolate that over the next six months, jobs are going to be pretty hard to find,” said Peter Dixon, an economist at Commerzbank AG in London. “Unemployment could become one of the main economic and political issues this year and may well be one of the triggers for more stimulus from the Bank of England.”
–With assistance from Mark Evans and Harumi Ichikura in London. Editors: Fergal O’Brien, Eddie Buckle
To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
