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British Unemployment Hits 6 Percent

Office for National Statistics said the number of unemployed rose 137,000 in the three months to August to a nine-year high of 1.86 million.

LONDON (AP) -- The number of jobless in Britain rose further toward the 2 million mark in the three months to October as the economy continues to slow at a dramatic pace, official figures showed Wednesday.

The Office for National Statistics said the number of unemployed using the International Labor Organization measure increased by 137,000 in the three months to August to a nine-year high of 1.86 million. The rise took the unemployment rate up to 6.0 percent for the first time since mid-1999, from 5.8 percent the previous month.

The statistics office also said that the number of people claiming the jobseekers allowance -- the main benefit available to the newly unemployed -- rose by 75,000 in November from the previous month to 1.07 million, its highest level since July 2000. The increase was the biggest since March 1991 when the British economy was last mired in a deep recession.

The increase in the claimant count was bigger than the 50,000 anticipated by economists and provided further evidence that the contraction in British output currently taking place is hitting the labor market hard.

"It is clear that, as in the U.S., conditions in the labor market are now deteriorating very quickly, threatening to feed back into yet further weakness in the housing market and economic activity in general," said Jonathan Loynes, chief European economist at Capital Economics.

The British economy saw output contract by a quarterly 0.5 percent rate in the three months to end-September and is set to contract further over the coming months. Both the government and the Bank of England have warned that Britain will see gross domestic product dip by more than a percentage point in 2009, with some independent economists predicting a 2.5 percent decline.

Given the gloomy backdrop, there are mounting worries that a raft of job losses will be announced by firms, particularly in the banking and retail sectors in the new year.

Early indications suggested that Christmas could well be a washout for retailers, some of whom earn up to 80 percent of their annual revenues during December.

The Confederation of British Industry reported that only 13 percent of retail firms said sales volumes were up in the first half of December compared with a year ago, while 67 percent said they were lower. The ensuing balance of -55 percent was the weakest since survey began in 1983.

Meanwhile, the statistics office reported that earnings growth remained subdued amid the rising unemployment tide. Headline annual earnings growth, which includes bonuses as well as wages, was 3.3 percent in the three months to October, way below the 4.5 percent level the Bank of England has indicated as a cause of inflationary concern.

Analysts said Wednesday's employment figures reinforced the pressure on the Bank of England to continue cutting interest rates aggressively in the new year.

The Bank of England has cut interest rates sharply in recent months to a 57-year low of 2 percent and is predicted to cut again in January possibly to 1 percent as it tries to fend off possible deflation -- falling prices -- next year, amid rising unemployment and waning wage demands.

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