Bank of England chief sees rocky ride ahead for economy!

LONDON, England - July 16, 2008 - The Bank of England's new chief economist warned that the UK is facing its toughest economic prospects in over a decade, as unemployment increases at the fastest rate since 1992.

Spencer Dale, who succeeded the newly promoted Deputy Governor Charlie Bean this month, told the Treasury Select Committee that rising joblessness should help keep inflation and wage increases under control, but said the economy is facing a rocky ride.

It came after the Office for National Statistics said the claimant count of people out of work and claiming the jobseekers' allowance rose by 15,500 in June to 840,100. It is the biggest one-month increase in 16 years, and fueled fears that Britain could face a 1990s-style increase in unemployment.

George Buckley at Deutsche Bank warned that the actual rise in overall unemployment may be even bigger than the 15,500, since many foreign workers may be returning home to booming labor markets in Eastern Europe rather than claiming benefits.

Although house prices have fallen and many economists think the UK is facing a recession, unemployment has so far remained low.

However, Capital Economics warned yesterday that unemployment could rise by 900,000 over the next 18 months, as the fall in available positions combines with a further increase in the size of the overall available workforce, due to higher immigration and more elderly people continuing to seek work.