More in work but claimants go up

The coalition yesterday hailed a record surge in employment – up more than 9,000 in Yorkshire over the past quarter – as evidence the private sector can fill the void as thousands of public sector jobs are cut.

But in spite of unemployment in the region falling by 12,000, there was a surprise increase in the number of people claiming out of work benefits – up by 300 – sparking claims by Labour the economy "is not out of the woods yet" and warnings by economists of "cracks" in the recovery.

The figures came as Yorkshire MPs met Chancellor George Osborne for a wide-ranging meeting during which they discussed plans for the region's economy as spending is cut.

The surprise increase in the number of people claiming Job Seekers' Allowance – up 2,300 last month to 1.47million nationally – was the first increase since January and took some of the gloss off an extra 286,000 workers nationally being in employment. Across the country, unemployment fell by 8,000 in the three months to July, to reach 2.47 million.

Senior economic advisor to the Ernst & Young Item Club Andrew Goodwin said: "The August rise in the claimant count, while small, was the first increase for seven months and provides further evidence that the labour market is on the turn.

"This is particularly concerning given that this comes before the public spending cuts have really got under way."

Vicky Redwood, of Capital Economics, said: "Cracks are appearing in the recovery. Even if the labour market holds up in the near-term, this is unlikely to last once public sector job cuts start in earnest."

Employment Minister Chris Grayling insisted the employment figures backed Tory claims that private sector job creation will more than soak up the number of public sector posts which are cut.

Mr Grayling, who admitted "lively discussions" are taking place among departments in the run-up to the Comprehensive Spending Review, told the Yorkshire Post: "It's a crazy situation where you can see the biggest jump in employment on record but actually a small increase in the number of people on benefits. It underlines the nature of the challenge we face.

"We've got to make sure when employment opportunities arise they go to people on benefits in this country and these figures say loud and clear in big neon that is not happening at the moment."

The biggest jump in employment came in the construction industry, although just over half of all the new jobs were part-time as students found work to fund their studies.

But Shadow Work and Pensions Secretary Yvette Cooper, MP for Normanton, Pontefract and Castleford, said: "These figures are worrying and show it is a foolhardy time to make such big cuts.

"For the first time since the turn of the year claimant unemployment went up in August, and the number of vacancies has also dropped significantly. And this is even before the major cuts take hold. Clearly the economy is not out of the woods yet. Cutting support for jobs and help to get the unemployed back to work right now is reckless and destructive, and will end up costing us all more."

MPs from across the region met Mr Osborne yesterday in the first in a series of meetings with senior Ministers designed to make sure the region's voice is heard.

MP for Skipton and Ripon Julian Smith said: "He outlined the Government's plans to make sure that there is support for enterprise and business across the region in the months ahead and said that was key to making sure Yorkshire and the North- East emerge strongly from the recession."