Jobs crisis as unemployment passes 2.5 million

The UK has seen its biggest rise in unemployment for two years, increasing by 80,000 in the three months to July, to hit 2.51 million.

This is according to the latest figures from the Office for National Statistics, which also show youth unemployment rising sharply by 78,000 over the quarter to reach 973,000. The number of young people out of work for more than a year is up by 35,000.

While an increase in private sector employment partially offset a fall in the public sector, the number of people in work dropped by 69,000 to 29.17 million.

Dr John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, warned that unemployment is likely to continue rising for some time.

“It’s clear from the large quarterly fall in employment and very sharp rise in headline unemployment that the UK jobs market is weakening significantly and that we can expect unemployment to continue to rise well into next year,” Philpott explained. “What’s most worrying is that the private sector jobs recovery has slowed markedly while the public sector jobs cull is accelerating rapidly.”

The British Chambers of Commerce (BCC) has echoed Philpott’s prediction that unemployment will continue to rise into next year but has called on the Government to stick to its plan for cutting the deficit.

David Kern, chief economist at the BCC, said: “These figures were disappointing, but not surprising in the face of the worsening global economic situation, and the Government’s tough austerity plan. We expect a net increase in the jobless total, with unemployment peaking at 2.62 million, or 8.2% of the workforce, in the fourth quarter of 2012.

“It is crucial that the Government perseveres with the deficit-cutting plan. However, there may be a need to make changes within the overall plan to give businesses a greater chance to create jobs and drive recovery.”

Graeme Leach, chief economist at the Institute of Directors, added that, in the current economic conditions, employers will remain cautious about recruiting staff.

He said: “The storm clouds are gathering, with falling employment and rising unemployment at a time when it is difficult to see how this might reverse. The ongoing uncertainty surrounding the eurozone crisis means that companies are likely to remain cautious about hiring and more certain about firing.

“On top of this, the continued sharp squeeze in consumer incomes, with real pay falling by almost 2%, means that high street prospects remain gloomy.”

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