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Job figs mask scary trends, say economists

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Official figures out today showed the number of people claiming unemployment benefits dropped 15,200 in December. The news fuelled belief that the UK is heading out of recession.

But economists said the figures could be a blip and that, either way, unemployment would remain high for the rest of the year. Meanwhile, the BCC pointed that employment fell as well as numbers on the dole.

David Kern, chief economist at the BCC, said: “The welcome fall in unemployment raises hopes that next week’s GDP figures will confirm that the recession is over.

“But, the labour market figures also show that there was a fall in employment, and more significantly, the level of economically inactive people has increased.

“The gap between public and private sector wages has widened, reinforcing the need for a freeze in the total public sector pay bill as a key measure in battling the UK’s unsustainable budget deficit.

“We cannot have a situation where public sector wages are outstripping those in the private sector. With wages overall increasing much slower than prices, there is clearly no need to tighten monetary policy in the near-term.”

Meanwhile, Howard Archer, an economist at Global Insight, warned, "doubts and concerns over the strength and sustainability of any recovery are likely to encourage businesses to keep their labour forces as tight as possible."

Britain is the final world power still stuck in recession after France, Germany, Japan and the US all dragged themselves from a downturn sparked by the global financial crisis.

Related article:BCC: Red tape threatens recovery

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