Unemployment levels could fall further leading to a double-dip.
The number of jobless Britons has risen.
A double-dip in employment could be a “real prospect”, according to the Institute of Public Policy Research (IPPR).
Statistics from the Office for National Statistics show that unemployment rose by 49,000 to almost 2.5 million in the three months to December last year and the IPPR is concerned that the figures may increase further.
The think-tank said that although a double-dip recession is unlikely an employment dip is a real possibility.
Tony Dolphin, IPPR chief economist, said: “History suggests the UK economy needs to grow at an annual rate of more than 2% if unemployment is to fall. There is a real risk that growth will not be fast enough during 2011, and that unemployment will reach new highs for this economic downturn”.
He added: “While the prospect of a double dip into negative growth has receded, a double dip in employment is a real prospect”.
Last year’s rise in unemployment can be attributed, in part, to the loss of thousands of public sector jobs – roles within local councils and authorities were slashed as a result of government guidelines announced in the Spending Review, which pushed the unemployment rate up to 7.9%.
Labour leader Ed Miliband, referring to the cuts, said: “The truth is [the Prime Minister is] cutting too far and too fast and it is British people who are paying the price”.
David Cameron described the figures as “disappointing” and a “huge concern”.