UK unemployment data : Is the UK heading back into recession?

This week has been a horrible weak for economic news, retail sales are flat, inflation CPI basis has risen to 4.4% and the minutes of the MPC meeting in August reveal the doves are back in the coop with no one voting for an increase in base rates.

Worse still the unemployment figures were revealed on Wednesday. The claimant count increased by 37,000 to a level of 1.564 million. This is the largest monthly rise since April 2009 and matches the level of August 2008, the beginning of the dreadful recession.

Last month the claimant count increased by 31,000 but unemployment LFS basis actually fell allowing some to dismiss the alarm signal as noise, “recording different things at different times”.

The latest release allows for no confusion in the message. Unemployment LFS basis in the three months to June increased to 2.494 million from the 2.455 million in the three months to March.

Employment in the three months to June increased by 220,000 but at a much slower rate than earlier in the year.

The claimant count gives cause for greater alarm. The unemployment measure provides a valuable signal as a coincident indicator to trends in GDP. As the chart demonstrates, inverting the claimant count and lagging by one quarter provides a high correlation and signal of trend.

If the claimant count increases at a similar rate over the third quarter, the message is clear, growth is off track, the recovery is slipping away and the UK is heading back into recession.

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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.