Shock as jobless total surges by most for 16 years

The number of people claiming unemployment benefits soared by 15,500 last month, its fastest rate since December 1992. It was far more than analysts expected, and came a day after a shocking rise in inflation fuelled fears Britain is on the brink of recession.

The Office for National Statistics was today also forced to revise up its jobless figures for May from an increase of 9000 to one of 14,300. It means the claimant count, which has risen for five consecutive months, has now reached 840,100 with many analysts warning it will top one million.

It piled renewed pressure on the Chancellor and Prime Minister Gordon Brown as they fought to convince voters they are able to steer Britain through the economic storm. Although the ONS said the number of people in work rose in the three months to May - thanks to people coming off long-term sick, the retired returning to work and immigration - the rate of growth is slowing.

Howard Archer of Global Insight said: "The labour market is being hit increasingly by the market economic downturn. Unemployment is a lagging indicator, and it seems inevitable that extended very weak economic activity and deteriorating business confidence will exact an increasing toll on the labour market over the coming months.

"Rising unemployment is likely to add to the downward pressure on house prices, by leading to more houses having to be sold for distressed reasons."

Plumbing giant Wolseley cut 700 jobs in Britain and Ireland today while builders, estate agents and construction firms have slashed thousands of jobs in recent weeks. Culls are also taking place in the City as banks cut costs. Official-figures today showed 118,000 people were made redundant in the three months to May, 10,000 more than in the previous quarter. Total unemployment rose 12,000 in the three months to May, taking the total to 1.62 million. That was still down 47,000 on a year ago but Capital Economics today said it expected unemployment to rise by 900,000 by the end of 2010 to 2.5 million.

"Much worse is to come," said Capital's Vicky Redwood. "The economy and the labour market are in for a rough ride."

The Government pointed out that today's figures showed overall employment rose in the three months to May by 61,000 to 29.59 million. Employment Minister Stephen Timms said: "Today's figures show that the number of people in work in the UK is at a record level.

"The rise in the claimant count is a concern but needs to be seen in context: the number of people on jobseekers' allowance is lower than a year ago and just over half its 1997 level."