UK jobless increases to 1.23m

By Jennifer Ryan  |   2009-2-12  |     NEWSPAPER EDITION

UNITED Kingdom unemployment rose for a 12th consecutive month in January as the deepening recession forced companies from auto makers to airlines to cut jobs.

The number of people receiving jobless benefits rose 73,800 to 1.23 million, the highest level since July 1999, the Office for National Statistics said yesterday in London. The median forecast in a Bloomberg News survey of 24 economists was 89,000.

Mounting job losses threaten to turn the recession into a political crisis for Prime Minister Gordon Brown, whose Labour Party lost more support after strikes broke out across the UK last month over the use of foreign workers.

The Bank of England may reduce the benchmark interest rate from the current 1 percent to revive an economy facing its sharpest contraction for 63 years.

"This is only the beginning of the deterioration of the labor market," said Nick Kounis, an economist at Fortis Bank in Amsterdam and a former UK Treasury official. "It looks increasingly likely that the bank is going to have to cut rates to zero."

The jobless total based on International Labor Organization methods rose 146,000 in the quarter through December to 1.97 million, the highest since August 1997, the year Labour took office.