UK unemployment falls as private sector jobs hit all-time high

Unemployment in Britain fell by 82,000 in the three months to October as the private sector created jobs faster than they were being shed in the public sector, the Office for National Statistics said.

Despite signs the economy started to weaken in the autumn after its strong summer expansion, employment rose to a record level of just over 29.6 million people following a 40,000 quarterly rise.

The ONS said that on the international-agreed ILO measure of unemployment, joblessness fell to 2.51 million between August and October, leaving 7.8% of the economically active population out of work.

Growth of 65,000 in private sector employment was responsible for the increase in jobs, with the public sector pay roll shrinking by 24,000 to 5.7m – its lowest level in a decade. The ONS said there were more private sector jobs in the economy – 23.8m – than ever before.

An alternative yardstick of unemployment – the claimant count – showed a 3,000 drop to 1.58 million in November, the ONS said.

Continuing the trend for 2012, the strength of the labour market surprised City analysts who had been expecting it to become tougher for those out of work to find jobs.

The increase in employment has yet to lead to a pickup in wage inflation. ONS data showed that average earnings excluding bonuses were 1.7% higher in the year to September than they were a year earlier.

James Knightley, economist at ING, said: “The fact that UK employment is rising, consumer confidence is up and anecdotal evidence of retail sales haven’t been too bad, offers some hope that the domestic situation in the UK is stabilising. The Bank of England’s funding for lending scheme is also showing some tentative signs of supporting the economy, with borrowing costs edging lower.

“As a result, it seems the main risks for the UK are currently external through the US fiscal cliff and eurozone worries, which the Bank of England can do little to offset other than subtly try and talk down sterling.”

Vicky Redwood, UK analyst at Capital Economics, said: “The latest UK labour market figures contain further signs that jobs growth is slowing. Although the Labour Force Survey measure of employment rose by 40,000 in the three months to October, this was the smallest increase since the start of the year.”