UK Unemployment Soars by 10%, Forecast to Rise to 2.5 million

By: Nadeem_Walayat

UK unemployment as measured by the labour market survey surged to 1.79 million, up 164,000 for the quarter to July 2008, which clearly does not take into account the economic meltdown since August 08, nor the subsequent financial sector crash that witnessed bank after bank go bust and falling into the arms of the state or state sponsored rescue packages both of which are resulting in huge job losses in the financial sector.

UK unemployment of 1.79 million compares against the jobless claimant count of 944,000, as the below graph illustrates both are exhibiting sharp rises and implies that the UK unemployment rate is highly likely to pass 2 million by the end of this year.

The long-term unemployed graph clearly illustrates that the claimant count is a lagging indicator and tends to play catch up to the unemployment rate, which suggests the UK economy is expected to experience huge costs in terms of benefit payments of additional several billions a year whilst at the same time of loss of tax revenues of several billions which further worsens the state of the government finances as the UK debt level soars well above the 40% golden rule onwards and upwards towards 100% of GDP.

UK Unemployment Forecast

The trend forecast paints a marginally brighter picture than the 3million figure currently being banded about, that implies the unemployment rate is targeting a rise to just above 2.5 million during the next 18 months to April 2010, which is still bad enough to ensure that the Labour Party will find it extremely difficult to hold onto power at the next election due by May 2010 deadline.

Deep UK Interest Rate Cuts

The worse than expected UK unemployment data supports the Market Oracle interest rate forecast for a deep series of cuts to take interest rates from 5% to 3.25% by September 2009. The government has already forced the Bank of England to cut interest rates by 0.5% despite surging inflation as the below graphs illustrate.

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By Nadeem Walayat
http://www.marketoracle.co.uk

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Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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