Jobless levels down as US worries send shares lower
Thursday 16 October 1997
The number of unemployed people claiming benefit fell to its lowest for 17 years last month. Yet it was not the latest evidence of a tight jobs market that sent shares lower yesterday, but rather evidence from retail sales figures that the US economy is still booming.
The FTSE 100 index ended 35 points lower at 5,263.7, having fallen 75 points after the release of the US figures. Wall Street finished lower too, the Dow closing 38 points down at 8,057.98.
Many analysts reckon interest rates will rise in both the UK and US next month. Minutes of the September meeting of the Bank of England's Monetary Policy Committee published yesterday showed that its experts were concerned about the impact of the soaring stock market on the economy, and also about the danger that wage growth might pick up.
The drop of 27,800 in the number of claimants during September took the headline unemployment rate down to 5.2 per cent, or 1,467,600 people.
Figures based on the Labour Force Survey (LFS), considered to be a more complete picture of the state of the jobs market, showed a drop of 40,000 in the number looking for work during June to August. On this measure unemployment returned to its lowest level since early 1990, at 1,997,000 people, or 7.1 per cent.
The decline in unemployment on this basis is much smaller than the headline change because strong employment growth has brought many people who had dropped out back into the jobs market. The survey shows that during the year to August employment climbed by 439,000, knocking 258,000 off unemployment and bringing 181,000 people who had become "economically inactive" back into the workforce.
Although both sets of figures showed that the jobs market has tightened, the growth in average earnings in the year to August remained at 4.5 per cent.
Economists were sharply divided about how to interpret yesterday's batch of figures. Some focused on the continuing fall in the jobless rate and rising vacancies. The number of unfilled vacancies at Jobcentres reached a record level of just under 301,000 in September.
Others, however, drew comfort from the steady earnings growth and the fact that the decline in unemployment might be slowing. According to the survey figures, the 40,000 decline in the number looking for work in the latest three months compares with a 73,000 drop in the previous quarter.
The possibility that the tighter jobs market might lead to high wage inflation was one of the concerns expressed by the Monetary Policy Committee. Although the committee voted unanimously not to raise interest rates, and also left rates unchanged at its October meeting, many City analysts expect an increase next month.
Kevin Darlington at ABN-Amro said: "It would not take much to push the Bank past the critical point." Figures next week for third-quarter GDP growth would be key to the decision.
On the other hand, Eric Fishwick of Nikko Europe predicted borrowing costs would not rise again this year: "It is obvious that the Bank has its finger on the trigger but feels there is no need to shoot just yet."
Separately, figures for retail sales in the US showed a sturdy increase in September rather than the decline most analysts had expected.
- 1 18th century sex toy found in 'toilet of sword fighting school' in Poland
- 2 US? China? India? The 10 biggest economies in 2030 will be...
- 3 'I wish my teacher knew...': Young students share their 'heartbreaking' worries in notes
- 4 Rebecca Francis accuses Ricky Gervais of using 'influence' to target female hunters after receiving barrage of death threats
- 5 Australian student Tommy Connolly, 23, adopts his pregnant, homeless 17-year-old cousin to give her a chance at 'a better life'
General Election 2015: David Cameron catching up in polls – but he badly needs a clear lead
South Africa xenophobic attacks: Shops looted and violence on streets of Johannesburg as foreigners are forced to hide in police stations
18th century sex toy found in 'toilet of sword fighting school' in Poland
'I wish my teacher knew...': Young students share their 'heartbreaking' worries in notes
Rebecca Francis accuses Ricky Gervais of using 'influence' to target female hunters after receiving barrage of death threats
The only black face in the Ukip manifesto is on the page about overseas aid
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...