* Unemployment at highest level in 17 years
* Government accused of choking off recovery
* More than one in five of youngsters without a job
By Sven Egenter and Olesya Dmitracova
LONDON, Oct 12 Unemployment in Britain has
jumped to its highest level since 1994, with young people hit
hardest as private companies fail to make up for job losses in
the public sector, piling pressure on the government to boost a
Deep cuts in state spending will erase more than 300,000
public sector jobs in coming years, while the economy is
teetering on the brink of recession again as consumers tighten
their belts and key export markets slow down, particularly in
The government was quick to blame the rise in unemployment
to 2.57 million on the global financial crisis and the euro zone
turmoil. But calls for it to ease its austerity plans increased
as fears of a "lost generation" of young people without hope of
a job are growing.
Economists also warned Britons should brace for more bad
news as employment numbers tumbled at recession-style rates.
"The figures are a disaster," said economist Alan Clarke of
Scotia Capital, adding that the economy was just not strong
enough to create jobs.
Less than a week after the Bank of England launched a fresh
round of stimulus to prevent a recession, BoE chief economist
Spencer Dale told Reuters in an interview that the economy was
likely to weaken further in the final quarter of this year.
The Office for National Statistics said the number of people
without a job on the ILO measure jumped by 114,000 in the three
months to August to 2.57 million, the highest total since
The jobless rate hit 8.1 percent, the highest since 1996.
Youth unemployment rose to 991,000, its highest since
records began in 1992, driving the jobless rate among eligible
16- to 24-year-olds to 21.3 percent.
John Philpott, Chief Economic Adviser at the Chartered
Institute of Personnel and Development, warned that this number
looked set to exceed the psychologically important 1 million
mark next month.
The government has been banking heavily on private firms to
create enough jobs to make up for the losses of private sector
jobs, but economists said the drop in employment was worrying.
"The number of people in work plunged 178,000 in
June-August, the biggest drop since mid-09 and the kind of
decline that previously has only been seen during recessions,"
said Citi economist Michael Saunders.
Employment Minister Chris Grayling agreed that the figures
were "not at all positive".
"What we're now seeing, I'm afraid, is the impact of the
international financial crisis, the troubles in the euro zone on
the economy in this country," he told the BBC.
The number of Britons claiming unemployment benefit rose by
17,500 in September, below analysts' forecast of a rise by
Unions seized on the dire numbers to mount a fresh attack
against the government.
"In the middle of the worst international recession for 80
years the Government itself is creating unemployment with
250,000 public sector posts already gone and still more to come.
Government policy is hurting but it's not working," said Paul
Kenny, General Secretary of Britain's GMB union, the country's
The coalition government of Conservatives and Liberal
Democrats wants to boost growth through lower corporate taxes,
fewer labour market regulations and other supply-side measures.
Finance minister George Osborne has also announced a scheme
to funnel loans more directly to credit-starved smaller firms,
though this plan may not take effect any time soon.
Meanwhile the Bank of England has swung into action and will
pump an additional 75 billion pounds ($117 billion) into the
economy in order to prevent a renewed recession.
But doubts remain over whether this will be enough of a
boost for the economy, which has barely grown over the past year
as consumers face a combination of soaring prices, higher taxes
and slow wage increases.
The ONS' figures showed that real incomes were still falling
as pay increases fell even further behind inflation rates of
nearly 5 percent.
Average weekly earnings including bonuses grew by 2.8
percent. Analysts had forecast a rise of 2.9 percent. Excluding
bonuses, earnings rose only 1.8 percent, below analysts'
forecasts of 2.0 percent.