The steepest fall in youth unemployment since records began offered welcome news for the recovery yesterday as the Bank of England gave a strong hint that interest rates would stay on hold at record lows into next year.
Overall unemployment fell by 132,0000 to 2.08 million in the three months to June, the lowest since January 2009, taking the jobless rate down to 6.4 per cent. The main driver behind the fall was a 102,000 decline in unemployment among 16 to 24-year-olds to 767,000 over the period – the biggest since the Office for National Statistics began collecting figures in 1992. Youth unemployment is now 206,0009 lower than a year ago, which is also a record.
But the ONS also revealed lingering pay pain for British workers as average earnings also grew at a rate of just 0.6 per cent – another record low and less than a third of the current 1.9 per cent inflation rate. The figures came as the Bank’s Governor, Mark Carney, stressed that rate-setters would be placing emphasis on wages amid uncertainty over the amount of slack in the jobs market, encouraging a sell-off of the pound which pushed the currency to five-month lows against the dollar.
The record fall in youth unemployment takes the rate to 16.9 per cent, less than three years after the jobless rate among 16 to 24-year-olds soared above the 1 million mark in November 2011.
But John Cridland, the CBI director-general, called for a countrywide network of “Back to Work Coordinators” to speed up the flow of young people into the jobs market.
He said: “The latest figures are very upbeat, but we cannot ignore the fact that far too many young people are still out of work. Youth unemployment was rising even in the good times and is still high enough to fill Wembley Stadium more than eight times.
“We cannot squander the talent of a generation … Young people should be equipped with the skills they need to succeed and given the chance to show what they’re made of.”
The figures cover a quarter in which the UK economy finally reclaimed the ground lost to the financial crisis, six years after the beginning of the recession. The UK’s overall workforce swelled by 167,000 to 30.6 million over the period, and the number of Jobseeker’s Allowance claimants is on course to fall below a million next month for the first time since September 2008, after sliding by 33,600 to 1.01 million last month.
The strong recovery in the jobs market prompted the Bank to cut its forecast for unemployment sharply to 5.9 per cent this year, although the low growth in wages also means it now believes the economy can sustain a lower rate of unemployment than previously thought without fuelling inflation. Mr Carney said the economy was now taking on a “semblance of normality” but also warned of heightened geopolitical risks such as the crisis in Ukraine. A strong pound meanwhile means the Bank forecasts lower inflation in two years’ time – another dovish signal on the likely path of interest rates.
Sam Hill, the senior UK economist at RBC Capital Markets, said: “A hike before the end of 2014 is feasible but given the developments on the inflation forecast the clear signal from today’s report is that the odds of a move before the end of 2014 have reduced further.”