Surprise figures raise fears of double dip back into recession for the UK

Published on 15/09/2010 19:18

FEARS have been raised that the UK's recovery could be "on the turn" and heading towards a double-dip recession after there was a lower than expected fall in unemployment.

The number of jobless people in the UK fell by just 8,000 in the last quarter, leading some to argue that the coalition government's severe cuts were potentially damaging to the economy.

A surprise increase in the Jobseeker's Allowance claimant count also reinforced fears of a relapse in the jobs recovery. Data from the Office for National Statistics (ONS) revealed 2,300 more people joined the dole queue last month, taking the total to 1.47 million - the first increase since January.

Economists said the figures cast doubts over whether the private sector was strong enough to compensate for the 600,000 jobs expected to go over the next five years under the government's imminent spending review.

Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said: "The August rise in the claimant count, while small, was the first increase for seven months and provides further evidence that the labour market is on the turn. This is particularly concerning given that this comes before the public spending cuts have really got under way."

While the ONS figures showed the steepest rise in employment since records began in the three months to July, much of this was students taking on part-time work rather than those on benefits finding jobs.

Those in part-time work increased by 166,000 quarter-on-quarter to 7.9 million in the three months to July suggesting many are still struggling to find full-time work. Full-time students in employment rose by 47,000 in the three months to July, while students classed as economically inactive fell by 62,000.

Vicky Redwood of Capital Economics said "cracks are appearing in the recovery".

"Even if the labour market holds up in the near term, this is unlikely to last once the public sector job cuts start in earnest," she added.

The government's spending review next month is expected to deal a devastating blow to the public sector workforce. But yesterday Prime Minister David Cameron insisted the government was on the right path - unusually quoting support from communist Cuba, which has started its own round of cuts.

The comments came after he condemned former Labour ministers for encouraging the TUC to pursue strike action over the cuts.

He added: "This week it was revealed that even communist Cuba has got with the programme, that we need to cut budget deficits and actually get spending under control.

"So we have got Comrade Castro on the same planet as the rest of us. We have just got to get the Labour Party and the trade unions on that planet."