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.
- 1 Disney heiress Abigail disowns her share of family profits in West Bank company
- 2 The secret report that helps Israel hide facts
- 3 'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
- 4 Ebola virus: UK health officials issue warning to doctors as experts admit the outbreak 'is not under control'
- 5 Ross Burden dead: MasterChef and Ready Steady Cook star dies at age 45 after suffering from cancer
'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
Richard Dawkins says 'date rape is bad, stranger rape is worse' on Twitter
Ross Burden dead: MasterChef and Ready Steady Cook star dies at age 45 after suffering from cancer
Zayn Malik on Israel-Gaza: One Direction singer bombarded with Twitter death threats after posting #FreePalestine
MH17 crash: Black boxes show plane suffered 'massive explosive decompression' following shrapnel hit
The secret report that helps Israel hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
- < Previous
- Next >
iJobs Money & Business
£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...
£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...
£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...
£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...