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UK jobless could soar even in a recovery

Published 20/11/2009

The UK's jobless rate could soar to 9.5% in two years' time, even after the economy begins to recover, a leading economic body has warned.

The Organisation for Economic Co-operation and Development (OECD) predicted unemployment would only reach its peak in 2011, from its recent 7.8% rate.

It also warned that further "substantive" measures may be needed to prevent lingering damage to the labour market caused by the rise in youth and long-term unemployment. Joblessness has increased faster than in most other European economies because of a deeper recession and more flexible labour rules, the OECD said.

But this is still a smaller fall compared to UK output than in previous recessions, as firms have looked to reduce working hours and retain employees.

The OECD said because of this employment will continue to fall "for some time" even after the economy begins to pick up.

Unemployment was 2.46 million between July and September, while the jobless rate among 16 to 24-year-olds was 19.8%, a record high.

Around 53,000 people are claiming unemployment benefit in Northern Ireland.

"With rising youth and long-term unemployment, further measures may be warranted to contain a negative impact on the labour market," the report said.

Official figures revealed yesterday that UK borrowing ballooned by a record £11.4bn in October, taking the total for the financial year so far to £86.9 billion.

This came a day after the Government unveiled a Fiscal Responsibility Bill, featuring plans to halve the UK's budget deficit within four years.

The OECD said Government policy measures to deal with the deficit would "drag" on the economy from next year. It also predicted that the deficit - expected to reach 10% or more this year - could exceed 13% next year.

The OECD urged the UK Government to give more details about its plans to tackle the country's finances.

The UK's recovery was forecast to be slow, with output growing by 1.2% next year, compared to the combined growth of 1.9% expected for the OECD group, which includes 30 developed nations.

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