Drop in UK jobless lifts recovery hopes

The number of Britons claiming unemployment benefit ticked higher in March, but those figures are still skewed by a recent rule-change for single parents, the Office for National Statistics said on Wednesday.

The rise in employment chimes with recent surveys showing that manufacturing and services firms plan more hiring, key for the economy as the government culls hundreds of thousands of public sector jobs in a bid to cut the budget deficit.

Other signs on Britain's overall performance have been mixed and Wednesday's numbers also showed wage growth slowing, highlighting the still-fragile state of the economy.

The number of people without a job on the broad International Labour Organization (ILO) measure fell by 17,000 in the three months to February to 2.480 million, the Office of National Statistics (ONS) said. That reduced the jobless rate to 7.8 percent, below forecasts for a reading of 8.0 percent.

In addition, the number of people in employment rose by 143,000 in the three months to February — the biggest increase since last September and driven by the biggest rise in the number of people in full-time employment since May 2007.

Shaky Recovery

The government is banking on private businesses to create new jobs to get the economy going again after a surprise contraction at the end of 2010.

However, the positive tone to the labor market report was marred by slowing wage increases, which will put household finances under further pressure at a time when taxes are rising and food and fuel costs keep climbing.

Average weekly earnings growth including bonuses eased unexpectedly to 2.0 percent from 2.3 percent in the three months to January, confounding forecasts for a rise of 2.6 percent. With inflation at 4 percent, that means people's real incomes are still falling.

Economists said modest wage growth showed the labor market recovery was fragile and provided the Bank of England (BOE) with leeway to hold fire on rises in interest rates as there was little risk of a spiral of higher wages that would boost prices.

Overall, the figures did not alter expectations that the BOE will not rush to raise rates from a record low 0.5 percent.

A surprise slowdown in inflation last month all but wiped out expectations of any tightening in May and caused markets to doubt any move before August.

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