UK Unemployment Reaches 7.6 Percent

Britain's unemployment rate increased to 7.6 percent as country's steep recession raised number of people out of work to 2.38 million in the March-May quarter.

LONDON (AP) -- Britain's unemployment rate increased to 7.6 percent as the country's steep recession raised the number of people out of work to 2.38 million in the March-May quarter, official data showed Wednesday.

The unemployment rate was up from 7.2 percent in the three months to April, and the number of unemployed rose by a record 281,000, the Office for National Statistics said.

Some 301,000 people lost their jobs in the period, the second highest figure on record and an increase of 31,000 over the previous quarter, the agency said.

"On the basis of these numbers we reaffirm our forecast that unemployment will peak at around 3.2 million next year," said David Kern, chief economist at the British Chambers of Commerce.

Britain is suffering the effects of the world financial crisis and its own collapsed housing market bubble. Sagging growth has led the Bank of England central bank to cut interest rates to a record low of 0.5 percent and take steps to expand the money supply, but it is expected that the jobs market will not recover soon.

"We doubt that unemployment ... will start to fall until GDP growth has got back toward its trend rate of 2.5 percent or so. And this might not happen for another couple of years," said Vicky Redwood, U.K. economist at Capital Economics.

The ONS also reported that average earnings excluding bonuses declined by 0.1 percent compared to the previous three months, but earnings including bonuses rose by 1.4 percent.

Unemployment was worst in the West Midlands, a base for the U.K. vehicle industry, at 10.3 percent. Northeastern England had the second-highest rate at 9.2 percent, while the southeast including London had a 6.1 percent jobless rate.

"Any optimism that unemployment will peak below 3 million next year before the jobs outlook starts to improve would appear to have evaporated," said John Philpott, chief economist at the Chartered Institute of Personnel and Development.

"Today's figures are truly horrendous," said Brendan Barber, general secretary of the Trades Union Congress.

"It's particularly worrying that over half a million unemployed people have been out of work for at least a year, including 133,000 young unemployed people," Barber added.

David Breger, partner at H.W. Fisher chartered accountants in London, said the unemployment figures highlighted the recession's impact on small- and medium-sized business -- "businesses that have been left high and dry by the banks' reluctance to lend."

"It must be particularly galling in the same week that Goldman Sachs, bailed out by the U.S. government, is announcing better-than-expected profits," Breger said.

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