Good news for Government as UK unemployment falls

The Government was given a pre-election boost on the jobs front today when unemployment fell and there was a huge cut in the numbers claiming jobseeker's allowance.

The so-called claimant count was 1.59 million in February after a fall of 32,300, the biggest monthly reduction since the end of 1997.

Total unemployment, including those not eligible for benefit, was down by 33,000 over the quarter to January to 2.45 million, the lowest for almost a year, and the biggest three-monthly fall for almost three years.

But the good news was tempered with other figures showing a record 8.16 million people classed as economically inactive, while the number of people out of work for longer than a year jumped by 61,000 to 687,000, the worst figure since 1997.

The number of people in work also fell in the latest quarter, down by 54,000 to 28.86 million, giving an employment rate of 72%.

Officials at the Office for National Statistics said the reason unemployment and employment were both falling was the rising numbers classed as economically inactive.

The number of inactive people, which includes students, those on long-term sick leave or who have given up looking for work, increased by 149,000 over the three months to January.

Unemployment among 18 to 24-year-olds fell by 34,000 to 715,000, but for over-50s, joblessness rose by 14,000 to 398,000.

The unemployment rate fell by 0.1% to 7.8%, the first quarterly fall for almost two years.

The claimant count has fallen for three out of the last four months.

Other figures today showed a 39,000 increase in job vacancies to 480,000, although the number of jobs in the UK fell by 119,000 to 30.75 million.

The number of workers in the public sector increased by 7,000 to 6.1 million in the last few months of 2009, while private sector employment fell by 61,000 to 22.76 million.

The economic inactivity rate is now 21.5% of the working age population, up by 0.9% on a year ago.

The ONS also reported that average weekly pay was £442 in January, an annual growth rate of 0.9%, up by 0.2 percentage points from the previous month.

Work and Pensions Secretary Yvette Cooper said: "The fall in unemployment for the third month in a row is very welcome, but we should remain cautious. We're not out of the woods yet and we are still determined to do more to support jobs and help the unemployed this year.

"The figures show the investment in jobs, education and training places is making a real difference. Half a million fewer people are out of work than anticipated at the time of last year's budget - saving over £10 billion as a result.

"However, now is not the time to cut back on support for jobs. We know things will be difficult for some time, and unemployment in the Eighties and Nineties rose for years after the recessions finished.

"That is why we plan to increase help to get people back into jobs this year, not cut it back, so we can support the jobs of the future."

Ministers said that since the start of the recession there has been a fall of 75,000 people claiming inactive benefits, including incapacity benefit, employment and support allowance and income support.

The Government today announced the funding for almost 7,000 Future Jobs Fund jobs, bringing the total so far up to 117,000. The new positions include jobs as sports coaches, youth workers, solar panel installers, housing and classroom assistants.

Employment minister Jim Knight said: "While it's good news that the number of young people claiming unemployment benefit has fallen for the fourth month in a row, there is no let-up in our investment to ensure every young jobseeker gets the chance to find work and make a future for themselves.

"I am delighted to announce a further 7,000 Future Jobs Fund jobs for young people as part of Government's unprecedented guarantee that 18-24-year-olds who are unemployed for six months will get a job, a work placement or a training opportunity.

"We are determined to give them the chance to develop skills and get that all-important foot on the career ladder."

Ministers still expect increases in unemployment before the summer.

Paul Kenny, general secretary of the GMB union, said: "At long last, the Labour Government policies to support the economy are kicking in.

"This fall in unemployment is very welcome. The recovery is still very fragile and things would have been a lot worse than they are without specific Government initiatives to save jobs.

"We now face the prospect of Tory-controlled councils cutting hundreds of thousands of jobs, which will not help the recovery one iota. Tory-led Surrey County Council, where GMB is currently dealing with 1,000 job cuts, is not untypical."

TUC general secretary Brendan Barber said: "Today's record fall in dole claimants is great news for the millions of people across the UK desperate to get back into work.

"The surprise fall in the number of people out of work for between six and 12 months gives hope that long-term unemployment is not going to be as bad as previous recessions too.

"Government and Bank of England stimulus have clearly helped to keep unemployment down, but with millions still under-employed and future economic growth far from guaranteed, it would be a desperate blow to British families to throw all this away on a programme of unnecessary early spending cuts."

Unison general secretary Dave Prentis said: "The fall in unemployment is good news for communities and families. However, this trend must not be reversed by heavy job losses in the public sector.

"Many Tory councils are using the recession as an excuse to cut jobs - even though they have billions stashed away in reserves.

"Cutting jobs causes a downward spiral. Vital local services are hit, communities are left without the help they need and more people are forced to claim benefits instead of paying taxes."

Graeme Leach, chief economist at the Institute of Directors, said: "While it's reassuring to see that unemployment is not rising, this is partly due to a big increase in the number of people dropping out of the labour market altogether. A second reason is that working fewer hours during the recession helped contain the increase in unemployment.

"This probably means that increased working hours in the recovery will reduce any gains in employment, and even when private sector employment begins to increase, public sector employment will begin to fall. 2010 will be a tough year for businesses and employees."

John Wright, chairman of the Federation of Small Businesses, said: "This encouraging trend of falling unemployment needs to continue over the coming months.

"The figures show that more people than ever before are working part-time but are trying to find full-time employment - this needs to be made a reality for the economy to grow.

"Seasonal staff that were taken on over the Christmas period now need to be given full-time jobs and the Government must lend a helping hand if small firms are to really tackle the challenge of rising unemployment."

David Kern, chief economist at the British Chambers of Commerce, said: "These better than expected unemployment figures are good news, and strongly reflect the sacrifices made by businesses and workers in restraining pay. However, they continue to hide worrying trends.

"The number of people in employment has fallen dramatically, with a significant decline among those in full-time work. The number of people working part-time, because they could not find a full-time job, has risen.

"More worryingly, the number of inactive people - those leaving the workforce - has risen to a record high.  If some of these people decide to look for work, unemployment could rise sharply.

"Despite the decline in unemployment, we reiterate our forecast that the jobless total is likely to increase to around 2.65 million over the next six to nine months.

"The Government should use the forthcoming Budget to introduce measures that support business' ability to increase employment - with particular emphasis on full-time jobs.

"Scrapping the hike in employer national insurance contributions, planned for next year, and substituting it with a 1% rise in VAT should be a top priority."