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Surprise fall in youth unemployment dismissed as the ‘lull before the storm’

 rolapy 2009-10-16

The rise in unemployment in Britain slowed abruptly in the three months to August as the number of young people out of work fell, official figures showed yesterday.

Unemployment climbed by 88,000 to 2.47 million, but the number of young people out of work fell to 946,000 — 1,000 fewer than the record high set in the three months to July.

The number of people signing up for jobless benefits climbed at the slowest pace in 16 months in September, rising by 20,800 to 1.62 million. Among 18 to 24-year-olds, the figure increased by nearly 8,000 to 490,000.

The statistics surprised economists who had expected unemployment to rise above 2.5 million and youth joblessness to climb to 1 million as tens of thousands of school and college leavers struggled to find jobs.

Paul Kenny, general secretary of the GMB union, said the figures provided “some tentative signs of a very fragile recovery in the economy”.

But David Blanchflower, a former member of the Bank of England’s Monetary Policy Committee, who was one of the first to forecast that unemployment could rise to 3 million, told The Times that the data on youth joblessness simply pointed towards the “lull before the storm”.

“It’s early days in the sense that the figures relate to August, so students have just finished college and are deciding what to do,” he said. “It’s a classic seasonal variation. It’s hard to believe that this is over.”

There was speculation that some graduates had chosen to continue their education rather than try to find work. Universities UK, the organisation that represents British higher education, said that although there were no official figures yet, anecdotal evidence suggested that there was a rise in the number of people taking up postgraduate studies.

Howard Archer, chief UK and European economist at IHS Global Insight, the research and intelligence group, said: “Perhaps with the jobs situation being so bad, more graduates have decided to take the summer off and travel before job hunting.”

Analysts also said that flexible wage deals, which have left millions of employees facing pay freezes, have helped to stem the rising tide of redundancies as companies can afford to keep more workers on.

Some 233,000 people were made redundant in the three months to August, down from 301,000 in the previous quarter. There was also a rise in people working for themselves, with the self-employed total up by 37,000 to 3.8 million.

Many economists still expect unemployment to climb to 3 million next year, but yesterday’s better than expected figures prompted some analysts to revise their forecasts. Karen Ward, UK economist at HSBC, said: “The business surveys are all consistent with a further moderation in the pace of job shedding. Our forecast is for unemployment to peak at around 2.7 million in 2010.”

But Vicky Redwood of Capital Economics, the consultancy, said: “We think the fiscal squeeze could require around 750,000 job losses in the public sector, meaning unemployment should easily surpass 3 million.”

Brendan Barber, TUC General Secretary, said: “The jobs crisis has not gone away and the economy remains very fragile.”

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