U.K. Jobless Claims Fall at Fastest Pace Since 1997

March 17 (Bloomberg) -- U.K. jobless claims unexpectedly fell in February at the fastest pace since 1997, suggesting the economic recovery is strengthening as Britons prepare for a general election within weeks.

The number of people receiving unemployment benefits dropped 32,300 from January to 1.59 million, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 29 economists was for an increase of 6,000. The pound jumped 0.7 percent against the dollar after the report.

The figures are a boost for Prime Minister Gordon Brown, who is seeking to persuade voters his Labour Party has the best strategy to cement the economic recovery. The Conservatives’ pledge to cut the record budget deficit faster than Brown is planning has cost the party support, raising the specter of a minority government after the election due by June.

“This is probably a good thing for Labour -- the ruling party can say unemployment is on its way down,” said David Tinsley, an economist at National Australia Bank in London and a former Bank of England official. “It’s a fine line they have to tread between talking up the recovery too much and not wanting to withdraw fiscal support too early.”

A wider survey-based measure of unemployment based on International Labour Organization counting methods fell by 33,000 to 2.45 million in the three months through January, the biggest drop since the fourth quarter of 2007. The 7.8 percent jobless rate on that basis compares with 9.7 percent in the U.S., 9.9 percent in the euro region and 4.9 percent in Japan.

Minority Government

In January, the number of jobless claims rose by 5,300 instead of the 23,500 increase originally reported. In February, the jobless rate fell to 4.9 percent from 5 percent.

A March 15 YouGov Plc poll for the Sun newspaper put the Conservatives 5 points ahead of Labour with 37 percent support, compared with a lead of 12 points at the start of the year.

Speculation that no party will get an outright majority of the seats in Parliament at the election sent the pound to a 10- month low against the dollar this month. Investors are concerned that a minority administration will find it hard to cut the deficit, which is almost as big as Greece’s at more than 12 percent of economic output. The pound was trading at $1.5309 as of 9:41 a.m. in London.

The Bank of England said this week its agents expect businesses to keep staff numbers stable in the coming months. Britain emerged from its deepest recession since World War II in the fourth quarter with growth of 0.3 percent.

SThree Plc, a U.K. recruiter for information technology companies, may increase staff levels by between 10 percent and 20 percent as orders improve, Chief Executive Officer Russell Clements said this month.

The statistics office said today growth in weekly pay including bonuses quickened to 0.9 percent in the three months through January from 0.7 percent. Regular pay rose 1.4 percent and bonus pay fell declined 7.1 percent.