UK unemployment rises to 2.68m

• Nearly 1m working days lost to November's strike
• Unemployment rate rises to 8.4%
• Claimant count hits 1.6 million
• Youth unemployment rises to 1.04m

Heather Stewart; guardian.co.uk, Wednesday 18 January 2012 05.44 EST

http://www.guardian.co.uk/business/2012/jan/18/unemployment-public-sector-strikes

November's pensions strike by public sector unions wiped out 988,000 working days, according to official figures – the most time lost to industrial action in a single month since Margaret Thatcher was in power.

The Office for National Statistics, which published its assessment of the impact of the strike on the labour market alongside the latest unemployment figures, said the last time a strike had such an impact was in 1989.

The data also shows that pay growth in the public sector, excluding the bailed-out banks, is running at just 1.4% a year, the slowest rate since comparable records began in 2001.

Unemployment across the economy rose by 118,000 in the three months to November, to 2.68 million, the ONS said, in the latest sign that the UK slowed sharply in the autumn.

The unemployment rate rose to 8.4%, the ONS said, its highest since 1995, and up 0.3% over the quarter.

There was some evidence that the labour market may be stabilising: the rise in unemployment was less dramatic than the 128,000 increase in the three months to October, while the narrower claimant count measure showed a smaller than expected increase of 1,200 in December to 1.6 million.

However, the ONS said a total of 1.3 million people are now working part-time because they are unable to find a full-time role: the highest number since records began in 1992.

The number of young people out of work is also continuing to rise, hitting 1.04 million in the three months to November, up 52,000 on the three months to October.

The ONS also confirmed that the painful squeeze on households' income has continued, with average pay across the economy just 1.9% higher than a year ago – less than half the rate of inflation.

The government's claim that private sector jobs growth will help to compensate for cuts in the public sector was undermined by news that 67,000 jobs were lost in the public sector in the three months to September – the latest period for which the ONS has figures – while the private sector created just 5,000 posts.

Chris Williamson, the chief economist at information provider Markit, said weak pay growth would continue to depress demand in the coming months. "The increase in unemployment, plus job security worries and low pay growth for those in work, means consumer spending may remain very subdued this year, despite lower inflation alleviating the squeeze on real incomes that caused so much distress to households in 2011."

Official figures next Wednesday will reveal whether the economy expanded in the final three months of 2011, with many City economists forecasting a negative number, which could mark the start of a new recession.