Olympics Boost For UK Employment

Employment created by the London Olympics is being largely credited for the latest fall in UK unemployment.

The Office for National Statistics (ONS) said the jobless total fell by 46,000 to 2.56 million in the three months to June, with London providing almost half of the employment opportunities in the run-up to the Games.

Employment rose by 201,000 in the period - to its highest level since May to July 2008 - which also helped the unemployment rate fall to 8% from 8.1%.

There were 1.01 million unemployed 16 to 24 year olds, down 4,000 from the three months to March. But it means 21.5% remain without a job and union organisation the TUC has described their job prospects as at their worst since 1994.

Other figures showed that the number of part-time workers had reached a record high of 8.07 million while those working part-time because they cannot find a full-time job is 1.42 million - the highest figure since records began in 1992.

There was a surprise fall of 5,900 in the number of people claiming Jobseeker's Allowance in July.

A rise of 6,000 had been expected by experts.

The employment figures fly in the face of the recession, which is set to ease in the current third quarter partly as a consequence of strong ticket sales for the Olympics, though there is little sign of a sustained recovery.

The Bank of England amended its forecasts last week to near zero GDP growth for 2012 as a whole.

However, rising employment will help boost consumer spending power which had been so badly hit by high inflation and low wage growth.

The ONS found that average earnings increased by just 1.6% in the year to June, 0.1% up on the previous month.

That figure fails to keep pace with the headline rate of inflation, measured just this week at an annual rate of 2.6% in July.

Analysts had expected the annual wage growth figure to top 1.8%.

The weaker-than-forecast increase suggests Bank governor Sir Mervyn King may have been premature in his expectation that the squeeze on the consumer's spending power was nearing its end.

The recent rises in employment amid a declining economy have largely baffled economists as surveys have suggested that firms remain reluctant to hire, citing fears for the economy and the wider effects of the eurozone debt crisis.

Confidence - among both companies and consumers - remains shattered if the findings of the research are to be believed.

David Kern, chief economist at the British Chambers of Commerce, said: "Overall, these figures show positive trends in the UK labour market and are difficult to reconcile with other ONS figures, which show three consecutive GDP declines since the end of 2011."

The bank has not ruled out further stimulus through its programme of quantitative easing to help boost money supply but there is a lack of demand for cash to invest.

The minutes of the bank's latest Monetary Policy Committee meeting showed there was no appetite for a cut in the base rate of interest to potentially help bring borrowing costs down.

Sir Mervyn all but ruled out such a move - suggested by the International Monetary Fund - for fear it would hurt building societies and other small lenders.

The Government has promised additional support for economic growth but it will be reluctant to signal the change of course from its austerity drive that Labour has demanded over its fear that Britain could lose its coveted triple-A credit rating which would force borrowing costs up.

It may be that only action on the European Central Bank's pledge to ease the effects of the euro crisis will boost confidence to the extent that businesses start to invest in earnest.