Jobless claims in the U.K. unexpectedly declined in the last month of 2010 to reach the lowest level in almost two years, which tempers the negative outlook as Britons brace for budget cuts, according to Bloomberg. On Wednesday, the Office for National Statistics reported that the number of people receiving unemployment benefits dropped by 4,100 to 1.457 million, which surprised economists expecting no change and marked the lowest level since 2009. The International Labour Organization found the unemployment rate unchanged at 7.9%, although 16-24 year-olds was the highest - 20% - on almost two decades of records.
The improvement in jobless claims comes as consumers in the U.K. are increasingly concerned over the outlook for the economy, with government spending cuts threatening to slow growth. A separate report showed that growth in pay excluding bonuses during the three months to November sat at 2.3%, which is lagging behind consumer price inflation that quickened to 3.7% in December. The disconnect between wage and price growth coupled with poor labor market growth means that household real incomes are being squeezed, according to Alan Clarke of BNP Paribas. Clarke added, This reaffirms our belief that consumer spending growth will be much weaker in 2011.