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UK unemployment stages big fall

Worker assembles door on BMW Mini car production line in Britain
Worker assembles door on BMW Mini car production line in Britain

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LONDON, England (Reuters) -- British unemployment staged its biggest fall in two years in the past three months while the claimant count rose only slightly, revealing a resilient labour market in the face of sluggish growth and the prospect of war.

The Office for National Statistics said on Wednesday the jobless total on the internationally-recognised ILO measure fell by 73,000 in the three months to January to 1.459 million, the lowest since the second quarter of 2001.

That dragged down the unemployment rate down to 5.0 percent from 5.2 percent in the previous three months.

"This shows the underlying trend in the labour market is still quite strong,'' said Ian Stewart, an economist at Merrill Lynch in London.

But the number of Britons actually claiming jobless benefits rose last month by 2,600 to 935,300. The January number was also revised to show a small rise. Analysts had expected another small fall in February.

Taken together, the numbers show Britain's labour market remains strong in spite of more than a year of sub-trend growth and recent survey signs that companies intend to reduce their workforces in order to further cut costs and boost margins.

Rate cut hopes dimnish

British gilts and interest rate futures fell sharply after the numbers were released as they coincided with news that the Bank of England's Monetary Policy Committee had voted 8-1 to keep interest rates on hold earlier this month.

The minutes did not show that the MPC was considering cutting rates soon again after its shock February cut, and dented market hopes for another swift easing.

The FTSE 100 index of leading shares was little moved, however, while the pound nudged slightly higher against the dollar, probably because the unemployment drop boosted expectations Britain's economy will weather the current storm.

The ONS numbers also showed that employment rose by 57,000 to 27.8 million in the three months to January, the highest since records began in 1984.

ONS data also showed growth in average earnings unexpectedly dropped to 3.6 percent in the three months to January compared with a year earlier, its lowest since April 2002, mainly as City of London financial companies slashed bonuses.



Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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