By Jennifer Ryan Feb. 17 (Bloomberg) -- U.K. unemployment unexpectedly jumped in January to the highest level since Tony Blair led the ruling Labour Party to power almost 13 years ago as the recession destroyed work at businesses from carmakers to banks. Claims for jobless benefits rose by 23,500 from the previous month to 1.64 million, the highest since April 1997, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 27 economists was for a drop of 10,000. The Bank of England said last week that employment is at risk of falling “significantly further” if the economy’s recovery from the longest recession on record falters. Prime Minister Gordon Brown is counting on the pickup to gather momentum and help him to claw back voter support in time for an election due by June. “The risk is that we get weak economic growth and public sector cutbacks and if we see both these things together it is likely that unemployment will rise significantly,” John Philpott, chief economist at the Charted Institute of Personnel and Development, said in an Bloomberg Television interview before the report’s release. The pound was little changed after the release, trading at $1.5753 as of 9:31 a.m. in London, down 0.1 percent on the day. The yield on the two-year benchmark government bond rose 1 basis point today to 1.157 percent. Joblessness based on International Labour Organization counting methods fell by 3,000 in the three months through December to 2.46 million. The 7.8 percent U.K. jobless rate on that basis is below the 9.7 percent figure in the U.S., 10 percent in the euro region and 5.1 percent in Japan. GM Cuts General Motors Co.’s Adam Opel GmbH division said Feb. 9 it plans to cut 369 positions at the Luton, England plant for its Vauxhall brand vehicles. Brown’s ruling Labour party has lost ground in opinion polls in an election campaign where the economy and the record budget deficit have taken center stage. A ComRes Ltd. poll published Feb. 14 gave the opposition Conservatives 40 percent support, up 2 percentage points. Labour had 29 percent, a drop of 2 points. The party has been in power since May 1997. The Bank of England said last week more Britons may have kept their jobs during the slump because wage growth stayed low. Governor Mervyn King said it was “far too soon” to say that no more purchases will be needed through the bank’s bond-buying program after policy makers paused the plan at 200 billion pounds ($315 billion) this month. Labor Risk “The weakness of earnings growth may have contributed to the resilience of employment during the downturn relative to the amount of lost output,” the bank said in its quarterly Inflation Report. “There remains a risk that employment could fall significantly further” which “could happen if the recovery in demand is more sluggish than companies expect, causing them to shed staff.” The statistics office said today its measure of average weekly pay including bonuses rose 0.8 percent in the fourth quarter, while excluding bonuses it increased by 1.2 percent. To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

Source