Bets on earlier rate rise after unemployment falls
A big fall in unemployment sent the pound up against the dollar yesterday and prompted traders to place bets on an earlier rise in interest rates from the Bank of England's Monetary Policy Committee.
The Office for National Statistics reported the headline unemployment rate dipped to 6.9 per cent in the three months to February, below the 7 per cent threshold at which the Bank had said it would consider a rise in rates.
This drop, which was bigger than analysts had expected, led financial market to price in a hike in interest rates by April 2015, rather than May 2015 previously.
That would mean base rates rising above their record lows of 0.5 per cent a month before the next general election. "We think this release overall adds to the case for expecting the MPC to go earlier than they indicated back in February – potentially at the end of this year" Allan Monks of JP Morgan said. In another reflection of the strong data, the pound yesterday rose 0.38 per cent against the dollar to $1.6793 and 0.4 per cent against the euro to €1.21.
The number of unemployed fell 77,000 in the three months to February on the previous quarter, taking the total jobless numbers to 2.24 million. The dole claimant count in March fell 30,400 in the month to March to 1.14 million.
Employment for the most recent quarter rose by 239,000, hitting 30.39 million. The increase was driven by self-employment, which rose by 146,000. There are now 4.5 million people designated as self-employed, a record 15 per cent of the workforce.
Joe Grice, the chief economist at the ONS, said: "These figures – rising employment and falling unemployment and inactivity – continue the strong trend in the labour market that has been seen in recent months."
When the Bank introduced its policy of "forward guidance" on interest rates last summer it did not expect unemployment to descend to the 7 per cent threshold until the second half of 2016. But when it became clear the rate was declining much more swiftly than it anticipated, the Bank in February announced a new regime whereby the timing of the next rate rise would depend on various measures of slack in the labour market, including under-employment.
The ONS reported that on most of these measures the amount of slack declined in the latest period. The labour participation rate rose, total hours worked went up, the vacancies to unemployment rate improved and the numbers working temporary jobs due to lack of permanent positions declined.
However, one measure, average hours worked per week, worsened, indicating more capacity than previously. Average hours worked fell by 0.4 per cent in the three months to February.
"The MPC's assessment of these developments in the May Inflation Report will be crucial" Ross Walker, of Royal Bank of Scotland, said.
Liam Neeson's Downton dreams
Thriller is set in the secret world of British espionage
Bomber jacket worn by Mary Berry sells out within an hour
Much-loved cartoon character returns - without Sir David Jason
Actress to appear in second series of the hugely popular crime drama
- 1 Thailand beach murders: Thai PM suggests 'attractive' female tourists cannot expect to be safe wearing bikinis
- 2 Scottish independence: Five reasons Salmond is secretly hoping for a 'No' vote
- 3 Isis plan to 'behead random member of the public' in Sydney thwarted by Australian police
- 4 Scottish independence: Andy Murray backs Yes campaign in eleventh hour decision
- 5 Have you heard about the film Singapore has banned its people from watching? Well, you have now
Thailand beach murders: Thai PM suggests 'attractive' female tourists cannot expect to be safe wearing bikinis
Scottish independence referendum live: Latest news as Scotland votes Yes or No
Scottish independence: Final opinion polls show undecided voters could swing result either way
Scottish independence: Almost half of No voters have felt 'personally threatened' by the Yes campaign
Isis plan to 'behead random member of the public' in Sydney thwarted by Australian police
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence referendum: A nation divided against itself
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
iJobs Money & Business
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...
Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...