Jobless rise will hinder recovery

HOPES that the economy may be poised for recovery were hit yesterday by an unexpectedly sharp rise in unemployment last month and evidence that manufacturers may not step up production in response to a revival in spending.

Unemployment rose by 41,100 to 2,908,900, according to seasonally adjusted figures from the Department of Employment. This was the 31st successive monthly rise and takes the number of people unemployed and claiming benefit to its highest in more than five-and-a-half years.

The jobless total is almost certain to breach the politically sensitive 3 million barrier early next year, with Ford and British Aerospace among companies planning to shed workers in the next few months. 'Unemployment is likely to continue rising until early 1994 and peak at around 3.2 million', said Sally Wilkinson, economist at Morgan Grenfell.

In November the share of the workforce unemployed rose to 10.3 per cent, with more than one in 10 unemployed in the South-east for the first time since the Second World War. Unemployment fell slightly in Northern Ireland.

The national increase was the largest since August. Unemployment has risen on average by 32,600 in the past three months, up slightly from the previous three months. Economists fear that a sustained acceleration could further dampen consumer spending and delay economic recovery.

Nearly 2 million jobs have been shed since early 1990, more than throughout the last recession. More than twice as many service sector jobs were lost in the three months to September as in any other quarter of this recession, with retailing suffering badly.

The December industrial trends survey by the Confederation of British Industry showed only a slight lifting in gloom among manufacturers.

For the sixth successive month, more of them expect to scale down production in the next four months than increase it. But the outlook was slightly less pessimistic than in October, which the Treasury hailed as 'generally encouraging'.

Manufacturers reported a slight improvement in order books, suggesting a boost from the pound's devaluation. But a six-to-one majority say they have more unsold goods in stock than they want. This suggests that any increased spending may be met by running down stocks rather than increasing output.

Earnings figures, page 20