Jobless Claimant Count Jumps to Highest Since 1997

LONDON (Reuters) - The number of Britons claiming jobless benefit jumped unexpectedly in January and at its fastest rate in 6 months, raising fears that an improvement at the end of last year may have been little more than a blip.

Figures from the Office for National Statistics on Wednesday showed claimant count unemployment rose by 23,500 last month, the biggest rise since last July.

The rise wiped out the declines seen in the previous two months and took the total number of claimants to its highest since 1997, when the ruling Labour party came to power.

Economists had been expecting claimant count unemployment to fall for a third consecutive month, by around 10,000.

"The standout figure is the increase in the claimant count, which calls into question the hypothesis that unemployment is falling," said Philip Shaw, chief economist at Investec.

There was better news on the internationally comparable ILO jobless measure, which includes people out of work and not claiming benefit. Unemployment on this broader measure fell by 3,000 in the three months to December to 2.457 million, its lowest since April-June 2009.

The ILO jobless rate was steady at 7.8 percent of the workforce, well below the rate of 9.7 percent in the United States and 10 percent in the euro zone.

"FEEL-BAD" RECOVERY

With a national election due by June, the Labour party is counting on an economic recovery to overturn a large opinion poll lead for the opposition Conservatives.

But analysts said any recovery was likely to be sluggish and Wednesday's labour market report fitted in with that, particularly since whichever party is in government after the election will have to tighten fiscal policy sharply to rein in a bulging budget deficit.

Britain's economy expanded by just 0.1 percent in the final quarter of last year after an 18-month long recession that wiped out six percent of economic output.

"The fact that the claimant count was falling in recent months was the huge surprise," said Ross Walker, an economist at RBS. "The fact that we have got a rise is not particularly surprising. It seems to fit more with the underlying reality."

Average earnings growth for the workforce as a whole remained subdued, at 0.8 percent in the three months to December. Earnings growth excluding bonuses held at 1.2 percent, matching the lowest since this series began in 2001.

With inflation running well ahead of pay growth, Graeme Leach, chief economist at the Institute of Directors, said there was a real risk the economy could tip back into recession.

"This really is the feel-bad recovery," he said. "Today's numbers support our view that the economy may experience a double-dip to the recession in the first half of 2010. Throw in a public sector recession in 2011 and we may even end up with a triple-tumble recession."

(Editing by Mike Peacock)