UK unemployment falls to 8 pct despite recession

August 15, 2012 - 6:36 AM

LONDON (AP) — Unemployment in the United Kingdom dropped to 8 percent in the three months through June, possibly due to a spate of hiring associated with the Olympic Games, official figures showed Wednesday.

The Office for National Statistics revealed that 46,000 fewer people were unemployed from the previous three month period, contributing to the fall in the overall rate from 8.2 percent.

The declines being registered have come as something of a surprise to a number of analysts, not least because Britain is in recession. Figures recently showed that the recession has got deeper, with output down 0.7 percent in the second quarter of this year from the first. That has prompted the Bank of England to revise down its forecasts for the U.K. economy. It now expects little or no growth this year.

"It seems that the Olympics have provided a temporary boost to the job market, with half of all of the new jobs having been created in London in the three months to June," said Chris Williamson, an analyst at financial information company Markit.

Minutes of the Bank of England's August meeting of the rate-setting Monetary Policy Committee, also released Wednesday, showed that all nine members voted to keep the main interest rate on hold at the record low of 0.5 percent and to leave the monetary stimulus unchanged.

However, the minutes revealed that some members found the decision "more finely balanced, since a good case could be made at this meeting for more asset purchases."

The Bank of England has authorized 375 billion pounds ($588 billion) in asset purchases, in a program known as quantitative easing. The policy is designed to keep a lid on market interest rates and encourage banks to lend.

The latest injection of 50 billion pounds, approved in July, is expected to be fully completed by November, which some analysts see as the likely time for a further increase.

The minutes showed that MPC members were watching the development of a new stimulus program, the Funding for Lending Scheme. The Bank is offering to lend Treasury bills to banks for a fee, and the banks in return will provide collateral in the form of loans to households and businesses.

"A number of banks had already announced reductions in the rates on certain mortgage and small-business loans," the minutes said. "It would take a while, however, before it would be possible to assess with any confidence the impact the scheme was having on lending."