More evidence of rising unemployment, particularly among young people, has highlighted the next economic challenge facing U.K. policy makers going into next year's election.
Official data published Wednesday showed joblessness jumped more than expected to its highest level for 14 years in the second quarter. More recent data showing the number of new workers claiming benefits also rose more than expected in July, indicating a further rise in unemployment over the summer.
The jobless rate rose 7.8% from 7.1% in the previous period, with 2.4 million people reported out of work, with worse to come. Bank of England Governor Mervyn King warned when presenting new economic forecasts Wednesday that totals will continue rising "for the foreseeable future."
Recent business surveys have indicated that the U.K. economy could begin emerging from its worst recession in 50 years by 2010. But rising joblessness underscores risks of future setbacks, or at best a sluggish recovery.
Jobs are being lost in all age groups, but younger workers are particularly vulnerable. Among European economies, the U.K. tops the list in the incidence of youth unemployment: nearly 40% of all U.K. workers losing a job are between the ages of 16 and 25, according to International Labor Organization figures.
Some 928,000 young Britons between under 25 is looking for work and the number is expected to top 1 million soon, according to the Office for National Statistics. The jobless rate in that age group of 19.1%, towering over the comparable 17.8% rate in the U.S.
Even the U.K's best-qualified graduates are struggling to find work as the employment situation deteriorates. Oliver Courtney, an Oxford University graduate about to complete a masters degree from another elite college, said he has been sending out applications for the past year and has secured only two interviews.
"Pretty much every student, no matter how qualified, is in the same boat. There's going to be a real sense of despair unless things start to pick up," he said.
Prime Minister Gordon Brown's Labour government last spring launched a program guaranteeing jobs for young people out of work for more than a year. But some in his own party question whether the program is any more sustainable than previous initiatives in the past 12 years of Labour government.
"A new generation are growing up jobless. We must acknowledge that the government's New Deal strategy failed to get many unemployed people into work, even at the height of the boom," said Frank Field, a former Labour Party welfare minister.
Brown's overall approval ratings have tumbled to 16 points behind the opposition Conservative Party. According to latest polling from Ipsos Mori, his popularity is falling fastest among 18- to 34-year-olds, who would normally be more likely to vote for Labour than for the Conservatives.
U.K. Business Secretary Peter Mandelson said the government will continue to commit resources to try to put more young people in jobs.
"What we cannot do is deliver these places by ourselves. We need the public and private sector to help us mount this national campaign to back young Britain," he said in a BBC radio interview Wednesday.
Mark Harper, who is likely to become minister for labor if the Conservatives gain power, said he worries that a "generation of young people are being written off." The Conservatives would immediately create 100,000 apprenticeships as a first step, he said.
"Unemployment is fast becoming the most pressing social, economic and political problem plaguing Britain, " Harper said. "Over the last year 2,000 people have lost their jobs every day."
One reason for the spike in youth unemployment is that significantly more Britons leave school early when compared with other developed countries, which means more unskilled youngsters are being thrown into a rapidly deteriorating labor market.
"We put way more young people into work than France or Germany or other developed economies and many are totally unprepared, particularly during a recession." said David Bell, a labor market economist at Stirling University in Scotland.
At the London School of Economics, an elite university and a launch pad into top jobs in banking and business, shell-shocked students are reconsidering their futures.
"I'm getting out of the U.K. for the next year at least. Hopefully, the market will have recovered by then," said Katie Allen, a 21-year old law student who is heading for India. "My pounds might be buy me less now, but I think getting away is a better option."