Surprise fall in unemployment in July

Unemployment continues to defy the wider economy as the number of people in work rose in July.

Unemployment fell to its lowest level for a year as a rise in the number of jobs in London, partly due to the Olympic Games, helped unemployment fall by 46,000 in the three months to June, down to 2.56 million.

This continued the trend of falling unemployment seen in the past few months, according to official figures from the Office for National Statistics (ONS).

However, some of the extra jobs are likely to be temporary caused by demand for services as a result of the London Olympic Games. London saw an increase of 42,000 jobs, suggesting that much of the improvement in July's figures was caused by the Olympics.

The number of people claiming jobseeker’s allowance fell by 5,900 to 1.59 million in July and the number of people in work was up by 201,000 to almost 30 million. This was helped by a big increase in the number of people in part-time work which increased to a record 8.07 million.

Youth unemployment fell slightly, by 4,000, to remain just above the one million mark.

Work and Pensions Secretary Iain Duncan Smith said: "These are positive and encouraging figures demonstrating the strength of our private sector, notwithstanding the difficult economic times, it is still creating jobs, the vast majority of which are full-time."

However, other economists believe the positive figures are unlikely to last.

Ranvir Singh, CEO of the market analysts RANsquawk, commented: “The markets surged on the upbeat jobs numbers, but no one is fooled by the surprising data. The economic indicators are simply not reflecting reality at present.

“While the fall in unemployment is hugely welcome, it’s likely to be largely due to short term jobs created by the Olympics.”

Howard Archer, Chief UK & European Economist at IHS Global Insight said: “The labour market continues to defy gravity and is performing remarkably well given the extended weakness of the economy. It is very hard to reconcile employment growth of 201,000 in the three months to June, with GDP contraction of 0.7% quarter-on-quarter in the second quarter, especially as this was a third successive quarter of decline.”

Labour spokesman Liam Byrne said: "Ninety percent of the fall in unemployment was in London, long-term youth unemployment is still going through the roof and part-time work has hit an all-time high as people struggle to find a full-time job. Crucially, there are now huge warning signs on the road ahead."