Record-high employment levels lessen chance of rate cut

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The Independent Online

Businesses recruited another 100,000 workers over the winter, triggering a record surge in the number of hours worked, cutting the jobless total and pushing up pay levels, official figures showed yesterday.

Businesses recruited another 100,000 workers over the winter, triggering a record surge in the number of hours worked, cutting the jobless total and pushing up pay levels, official figures showed yesterday.

In a batch of data pointing to a tightening labour market, the Office for National Statistics said employment rose by 99,000 in the three months to November - 1,000 new jobs a day - to 28.49 million, the highest level since records began in 1971.

The annual growth rate for average earnings - salaries and bonuses - rose to 4.5 per cent in November, a seven-month high, up from 4.2 per cent in October. This puts it in line with the level the Bank of Englandsaid it sees as the maximum consistent with its inflation target.

The average number of hours worked rose by one-third of an hour in the three months to November, the largest quarterly increase on record. The total hours worked reached a record 914 million a week.

The number of people out of work and claiming benefit fell by 6,200 in December, taking the total to a 29-year low of 626,300. However the more respected Labour Force Survey measure rose 13,000. Meanwhile the number of inactive people - unable or unwilling to look for work - fell for the first time in a year.

Analysts said the strength of the figures, which came a day after inflation posted an unexpected rise, dashed hopes of a interest rates cut next month. Simon Rubinsohn, the chief economist at Gerrard fund managers, said: "It would be remarkable if the authorities were to ease [policy] against a backdrop of such strong gains in employment. We suspect the next move will be up."

The Bank of England cited the tight labour market as a factor that could push up inflation faster than it has forecast.

Labour market watchers are waiting for figures for January, the start of the bonus season for City banks and a key month for wage settlements.

Some analysts said there was enough mixed news in yesterday's figures to allow the Bank's rate-setting Monetary Policy Committee to sit on its hands in the coming months. Malcolm Barr, at JP Morgan, said: "Our view that rates will hold at 4.75 per cent through 2005 is based on the notion that stable earnings will act to assuage their inflation concerns."

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