By Jennifer Ryan 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 as much as 1 percent against the dollar after the report. The figures provide 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. “This is probably a good thing for Labour,” 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.” The pound traded at $1.5354 as of 11:30 a.m. in London, up 0.7 percent from late yesterday. The Labour Party pointed to the data as evidence of the success of its policy of maintaining public spending until the recovery is assured. ‘Vindicates Our Approach’ “It vindicates our approach,” although “things are still fragile,” Business Secretary Peter Mandelson told reporters in London. Pensions Secretary Yvette Cooper said in a statement that “now is not the time to cut back on support for jobs. We know things will be difficult for some time.” Brendan Barber, general secretary of the Trades Union Congress, said Conservative plans to begin cutting spending this year “would be a desperate blow to British families.” 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 to account for routine seasonal adjustments, the statistics office said. In February, the claimant count rate fell to 4.9 percent from 5 percent. Today’s report also pointed to signs of weakness in the labor market. The number of people in work in the three months through January fell by 54,000 to 28.9 million. The main reason unemployment also fell during the period was the rising number of people leaving the workforce. The number of inactive people, including students, those on long-term sick leave or people who have given up looking for work, climbed by 149,000 to a record 8.16 million, or 21.5 percent of people of working age. “Jobless young people are thus turning to study in their thousands to avoid the dole,” John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, said in an e-mailed statement. “Although a fall in unemployment is clearly better than a rise this should not be read as a sign that the U.K. jobs market is recovering strongly.” A March 15 YouGov Plc poll for the Sun newspaper put Conservatives 5 points ahead of Labour with 37 percent support, compared with a lead of 12 points at the start of the year. Budget Deficit Speculation that no party will get an outright majority of the seats in Parliament at the election sent the pound below $1.50 for the first time since May. 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 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. The central bank said in a separate report today that the nine-member monetary policy committee unanimously kept its 200 billion-pound ($307 billion) bond-purchase program on hold for a second month to assess the outlook for growth and inflation. 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. To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

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