Recession-hit Britain took a fresh blow yesterday as official data showed 2 million people in the country claiming jobless benefits for the first time since Labour came to power in 1997.
Britain’s unemployment rate jumped to 6.5 percent in the three months to January, also a 12-year high, said the Office for National Statistics.
The claimant count soared by 138,400 last month, the biggest monthly gain since records began in 1971 as Britain endures its first recession in 18 years.
The thirteenth consecutive monthly rise in claims was far higher than the market consensus estimate of 87,500, Dow Jones Newswires said.
“The unemployment data are truly awful, heightening fears about the potential depth and length of the recession” in Britain, said Howard Archer, chief European economist at IHS Global Insight.
“Unemployment smashed through the 2 million barrier with ease ... and it seems set to head up towards 3 million pretty rapidly over the coming months as the economy contracts sharply and struggling businesses look to contain their costs,” he said.
In an attempt to turn round Britain’s fortunes, the Bank of England (BoE) has in recent months slashed local interest rates to a record low of 0.5 percent.
The BoE’s monetary policy committee voted 9 to 0 to cut borrowing costs, minutes of their meeting showed yesterday.
BoE policymakers also voted unanimously to pump out £75 billion (US$106 billion) of newly created money.
In its statement yesterday, the Office for National Statistics said: “The unemployment rate was 6.5 percent for the three months to January 2009, up 0.5 [points] over the previous quarter and up 1.3 [points] over the year.
“The number of unemployed people increased by 165,000 over the quarter and by 421,000 over the year, to reach 2.03 million. The unemployment level and rate have not been higher since 1997,” it said.
In an extraordinary bid to free Britain from the worst economic downturn in decades, the BoE has issued new money in so-called “quantitative easing” measures as it tries to boost lending in the crisis-hit economy.
The central bank is buying government bonds from commercial banks in the hope that the institutions will again lend in vast quantities to businesses and individuals after sitting tight since the credit crisis erupted in 2007.
With British interest rates so low and having little traction, quantitative easing is seen as the next best option, modeled on the Japanese experience of the 1990s when the government there created money of its own.
The new cash is created electronically, but the process has much the same effect as printing notes because it expands money supply and boosts the balance sheets of banks and institutions.
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