THE number of people claiming unemployment benefit in Britain increased in February for the first time in two and a half years, delivering a blow to Chancellor of the Exchequer Mr Kenneth Clarke's hopes that consumers would soon begin to feel the benefits of economic recovery.
But low growth in earnings in the year to January, the key month for pay settlements, encouraged hopes of further interest rate cuts.
The government shrugged off last month's increase in the number of claimants, a rise of 6,800 to 2.21 million, as a one off fluctuation around the downward trend, and some City economists agreed that unemployment would resume its decline. Mr Kevin Darlington at brokers Hoare Govett said: "The figures will not yet reflect any significant impact from the recent spate of rate cuts."
On the other hand, some took a glummer view of the outlook. "The number is not a fluke, it reflects the weakness in the economy. There is a very respectable argument that interest rates must fall further," said Mr Neil MacKinnon, chief economist at Citibank.
