Jobless levels down as US worries send shares lower

The number of people out of work in Britain has fallen to its lowest level for years, and some experts fear a new wage-price spiral. But the financial markets are more worried about the risk of higher inflation and interest rates on the other side of the Atlantic, writes Diane Coyle, Economics Editor.

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.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor