By Jennifer Ryan Feb. 17 (Bloomberg) -- U.K. jobless claims 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. The number of people receiving unemployment 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 jobless rate on that basis stayed at 5 percent. 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. “It’s a concern given that we thought the labor market was improving,” George Buckley, chief U.K. economist at Deutsche Bank AG in London, said in a telephone interview. “Firms are faced with the possibility that the level of economic activity is lower and weaker than they thought, and that raises the possibility that they’ll decide to shed jobs in the future.” The pound was little changed after the release, trading at $1.5770 as of 10:55 a.m. in London, unchanged on the day. The yield on the two-year benchmark government bond rose 3 basis points today to 1.177 percent. ILO Measure A wider survey-based measure of unemployment 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. The rate is 5.1 percent in Japan. 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. Lloyds Banking Group Plc, the U.K.’s biggest mortgage lender, said Jan. 21 it plans to eliminate 685 jobs in its wholesale and consumer divisions, resulting in a net reduction of 585 jobs across the U.K. Brown’s Labour party is trying to eliminate the Conservatives’ lead in opinion polls in an election campaign where arguments on measures to tame a record budget deficit and cement the recovery have taken center stage. A ComRes Ltd. poll published Feb. 14 gave the 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. ‘Completely Barmy’ “It would be completely barmy to be slashing public spending, just as the Conservatives are proposing right now,” Work and Pensions Secretary Yvette Cooper told Sky News television today. Unemployment is lower than the government forecast a year ago, thanks to government support, she said. 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. Policy makers voted unanimously to keep the program unchanged on optimism that inflation will return to the 2 percent target, minutes of the Feb. 4 meeting released today in London showed. “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

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