Credit Crunch

Unemployment figures soar and inflation rises

It has recently been reported that the number of people claiming unemployment benefit has seen it’s biggest increase for more than fifteen years during the month of June.

This is yet another indicator of the impending recession that threatens not just our economy but that of the global economy. The Office for National Statistics stated recently that those claiming Jobseeker’s Allowance rose by 15,500 to 840,100. The figures from May showed a 9,000 rise which made a total of 14,300 new claimants during that month.

In recent weeks, some of the UK’s biggest housebuilder companies have slashed around 5,000 jobs as the credit crunch grows ever more intense. In January, February and March, 118,000 people were made redundant, which is a rise of 10,000 on the previous quarter. According to further data from the ONS, the total number of unemployed people was 1.62 million in those three months, up 12,000 on the previous quarter. The unemployment rate, it states, was unchanged at 5.2 per cent.

Furthermore, the number of job vacancies fell in the quarter to June as the economic slowdown began to really bite. Vacancies stood at 655,100, down 32,200 on the previous three months. Jobs in the manufacturing sector also further declined in the quarter to May, falling 36,000 to 2.89 million compared with the previous year, the lowest since records were begun in 1978.

In other economic news, the stock market fell to its lowest level since 2005 yesterday as unsettling news regarding inflation and the increasingly unstable financial situation in the US hit share values.

Inflation reached 3.8 per cent in June, which is almost twice the Bank of England’s 2% target. This unexpectedly high rise intensified fears that the Bank would not be cutting interest rates in order to halt the economic slide towards recession. Inflation is now increasing at the fastest rate since the Bank achieved anonymity over interest rates in 1997.

Andrew Sentance, of the Bank of England’s Monetary Policy Committee, issued a warning that standards of living in the UK would be ‘squeezed’ and that unemployment would rise while the Bank of England struggles to keep inflation under control. Mr Sentance also stated that the Bank was concerned that higher prices could signal the firm entrenchment of inflation, as it did in the ‘70’s.