City adds to unemployment woes

City job vacancies took another dive last month, as a further 9,000 people joined the dole queue across the UK...

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Last Updated: 31 Aug 2010

UK unemployment rose by 38,000 to 1.64m in the three months to April, the Office of National Statistics said this morning, while the rate of earnings increase confounded analyst expectations by slowing to 3.8%. And things didn’t improve in May: according to the ONS, the number of people claiming unemployment benefit climbed for the fourth month in a row, rising 9,000 to 819,000. 

Not surprisingly (given its role in proceedings) the City is also feeling some of this pain. According to recruiter Morgan McKinley’s monthly Employment Monitor, the number of jobs currently being advertised is 17% down on last year, while the average salary has fallen 5% to £48,347 – both key indicators that the job market is getting tighter in the Square Mile. For the fifth month in a row, there are now more jobseekers than there are job vacancies, which is bad news if your ailing bank has just given you the boot.

Still, glass-half-full types do have some cause for optimism. A bigger candidate pool – both in the City and elsewhere – means that employers can be a bit choosier about who they hire, and they won’t have to pay through the nose for the privilege. This drives down earnings, which may not go down well with jobless bankers but could be a boon for the overall economy.

After all, there’s been a general concern that soaring food and fuel prices could lead to higher wage settlements, which would push inflation even higher and probably force the Bank of England to hike interest rates. But if earnings growth stays under control, it might be able to start cutting rates in order to get us spending again, without worrying about making inflation worse. Or at least, that’s the theory…

There are even some signs that we’re starting to get the message about cutting back on our spendthrift ways. According to the International Energy Agency, UK petrol sales may have dropped by as much as 20% in the last 12 months, because it’s just become too expensive to fill up the car. The proposed tanker strike might change things briefly, if people start panic-buying petrol, but it’s clear that the ever-increasing price at the pump is starting to bite. Nothing like an economic crisis to help the environment...

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