Unemployment: Fall in jobless total is second biggest on record, renewing speculation about interest rate rise
Drop takes rate within 0.1% of threshold at which Bank of England could end interest rate freeze - but it may still "move the goalposts"
Andrew Grice has been Political Editor of The Independent since 1998. He was previously Political Editor of The Sunday Times, where he worked for 10 years, and he has been a Westminster-based journalist since 1982. His column, Inside Politics, appears in The Independent each Saturday.
Wednesday 22 January 2014
Unemployment has fallen to its lowest figure for almost five years, but the drop is unlikely to trigger an early rise in interest rates.
The number of jobless dropped by 167,000 in the three months to November to 2.32m, the second biggest fall on record. The unemployment rate fell to 7.1 per cent, close to the seven per cent at which the Bank of England will consider an increase in interest rates.
However, the Bank is expected to “move the goalposts” next month by changing its strategy. The threshold may be cut to 6.5 per cent and other factors may be taken into account.
Minutes of the last meeting of the Bank’s Monetary Policy Committee accepted that unemployment would reach the threshold "materially earlier" than expected. With inflation back to the Government’s two per cent target, the committee “saw no immediate need to raise Bank Rate even if the seven per cent threshold were to be reached in the near future. Consequently when the time did come to raise Bank Rate, it would be appropriate to do so only gradually."
Ministers hope that any interest and mortgage rate rises will be delayed until after the general election in May next year and some City analysts predict their wish will be granted. Howard Archer, chief UK economist at City forecaster IGS Global Insight, said: “We believe the odds remain strongly in favour of interest rates staying at 0.5 per cent all through 2014. While rates will probably start rising in 2015, this may still not happen until around the middle of the year.”
Dr John Philpott, director of The Jobs Economist, said: "It's now inevitable that unemployment will soon fall below the Bank of England's forward guidance rate of seven per cent. However, the weakness of pay growth suggests there is still a considerable amount of slack in the labour market which for the time being remains an inflation free zone. Better news on jobs is no reason for an early rise in UK interest rates."
Yesterday’s figures showed that average wage growth has remained at 0.9 per cent - well below the two per cent level of inflation. The Bank is under pressure to consider using pay growth as an additional threshold for its policy on rates.
Ministers welcomed the faster than expected fall in unemployment. The quarterly fall of 167,000 is the biggest since the autumn of 1997 and the second largest since records began in 1971. The number of people in work reached a record high of just over 30m, giving an employment rate of 72.1 per cent, an increase of 0.5 per cent over the three months to November. The number claiming Jobseeker’s Allowance in December fell by 24,000 to 1.25m.
The Bank of England says a figure of 7 per cent will not automatically trigger an interest rate rise
David Cameron and Ed Miliband clashed over the figures in the Commons, after the Labour leader accused the Prime Minister of being “complacent” about a fall in average wages of more than £1,600 since the Coalition was formed. Mr Cameron argued that this figure did not take account of increases in the personal tax allowance, insisting that take home pay rose faster than inflation in 2012-13. He hailed the biggest ever quarterly increase in the number of people in work.
But Mr Miliband said it was “scandalous” that a majority of 13 million people living in poverty are in work rather than jobless.
Mr Cameron blamed the slow growth in pay on “the mess” left by Labour and “the longest and deepest recession in living memory.” He told Mr Miliband: "You are like an arsonist who goes around setting fire after fire and then complains when the fire brigade aren't putting out the fires fast enough.”
Mr Miliband replied that Mr Cameron “cannot be the solution to the cost of living crisis because he just does not understand the problem".
Culinary experts in The Netherlands thought it was 'fresh' and 'tasty'
Of all the computers Apple has ever made there’s only one that Steve Jobs had to sell his car to finance
Actress sees off speculation about her face in an amazing way
Marvel has released first teaser trailer week early after it leaked online
The sound of Goodfellas mafioso Frankie Carbone demanding $250m in “damages” would be chilling enough on film, let alone in real life.
- 1 Nokia no more: Microsoft drops once-ubiquitous mobile name – in favour of its Lumia brand
- 2 Renee Zellweger on plastic surgery: 'I'm living a fulfilling life and I'm thrilled that perhaps it shows'
- 3 Banksy not arrested: Internet duped by fake report claiming artist's identity revealed
- 4 Australian café owner sparks debate after saying 'No' to having unruly children on premises
- 5 Paralysed man Darek Fidyka walks again after treatment by British doctors on brink of 'cure' for paralysis
Ottawa shooting: Canadian soldier dies after being shot at National War Memorial – with one gunman killed inside parliament
Renee Zellweger on plastic surgery: 'I'm living a fulfilling life and I'm thrilled that perhaps it shows'
Isis releases first video showing the stoning of woman accused of committing adultery as her father shouts 'don't call me Dad'
Banksy not arrested: Internet duped by fake report claiming artist's identity revealed
Diwali: What is the festival of lights and how is it celebrated around the world?
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver 'kicks gay couple off for kissing'
£250 - £300 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT** Our...
£21000 - £31000 per annum: Randstad Education Chelmsford: KS2 Teachers - Chelm...
£32000 - £38000 per annum: Ampersand Consulting LLP: SAP ABAP Developer - Rugb...
£80000 - £90000 per annum: Sauce Recruitment: Working for an International Mul...