The Office for National Statistics said that the claimant count – the most timely measure of unemployment – increased by 2,400 to hit 1.46 million in January, piling on the misery for households already suffering what Mervyn King has called the biggest decline in living standards since the 1920s.
Unemployment also increased on the wider ILO measure, rising by 44,000 in the three months to December to hit 2.49 million, as the economy contracted. The unemployment rate was 7.9%, up from 7.8% over the previous three months, the ONS said.
Economists said the worse-than-expected news was alarming, because it showed that job losses were already mounting before the worst of the governments’ spending cuts started to bite.
Howard Archer, of consultancy Global Insight, said: “The labour market data are disappointingly softer overall and fuel our suspicion that unemployment is likely to trend up gradually in 2011 in the face of below-trend growth and increasing job losses in the public sector.”
Paul Kenny, general secretary of the GMB union, said: “This rise is no surprise since the government itself, with the vocal support of the bankers who caused the recession, is deliberately creating unemployment with public sector cuts.”
Women appear to be bearing the brunt of the latest wave of job losses: the number of men claiming unemployment benefit fell by 5,400 between December and January, but the number of women claimants rose by 7,800.
Young workers are also struggling to make their way in the depressed labour market, the ONS reveals, with one in five 16 to 24-year-olds – 965,000 people – now unemployed.
There was comfort in the figures for dovish members of the Bank of England’s monetary policy committee, however, as average earnings rose at an annual rate of just 1.8%, down from 2.1% in the three months to November.
That suggests there is little evidence so far of above-target inflation passing through to workers’ pay-packets and creating the kind of “wage-price spiral” that could force the Bank to clamp down with higher interest rates.
Even in the expanding manufacturing sector, one of the bright spots in the economy, wage settlements averaged 2.2% in the three months to January, according to a survey by industry group the EEF, published to coincide with the unemployment data. “Firms remain under intense pressure to control their internal costs in the face of global competition and these figures would suggest as yet the Bank of England has little to fear from inflationary agreements in manufacturing,” said the EEF’s chief economist, Lee Hopley.