Why is the unemployment news so good? Well, a lot of it stems from keeping wage rises to a minimum

Still, the question of a return to a more normal interest rate regime is in play

Share

Headlines I never thought I’d see: “Staggeringly strong labour market,” ran one economist’s take on the latest UK jobs figures. Pretty much every observer agreed. The long winter in the UK’s labour market is over.

So why is the news so good? As former Bank of England policymaker David Blanchflower pointed out in these pages on Monday, a lot of it is because we have kept wage rises to a minimum. Compared with past recessions, that is a new factor, and one that means the Bank need not raise rates in the way it might have in the past to constrain consumer spending. More people are in work - but at lower wages that doesn’t mean the economy is about to boom and inflation is set to let rip.

Still, the question of a return to a more normal interest rate regime is in play, and it will happen, sooner or later. It will be a symbolic moment with a psychological impact. The media will unhelpfully scream about “hikes” and opposition politicians will go on about “hard working families” facing an even more acute cost of living crisis.

And yet the reality will be much different. The Bank will move to tighten policy, reverse its “quantitative easing” and move from an historically low Bank Rate rate only slowly and with baby steps. Even if rates went to 0.75 per cent by the time of the next election, it might only add £20 a month to a mortgage (depending on how far and how fast the lenders pass the rate rise on to their customers).

Set that, please, against the virtual holiday from interest payments for an astonishing five years those on tracker mortgages have enjoyed – effectively a windfall gain of many thousands of pounds.

So the best thing that Bank Governor Mark Carney can do is to educate and reassure a jittery public. When rates will rise is unknown; what is certain is that the Bank will strain every intellectual sinew to ensure that there will be no sudden jolts to an economy that is far from fully recovered. So please; try not to worry.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

BI Manager - £50,000

£49000 - £55000 per annum + competitive: Progressive Recruitment: My client is...

BI Project Manager - £48,000 - £54,000 - Midlands

£48000 - £54000 per annum + Benefits package: Progressive Recruitment: My clie...

VB.Net Developer

£35000 - £45000 per annum + competitive: Progressive Recruitment: If you're pa...

SAP Business Consultant (SD, MM and FICO), £55,000, Wakefield

£45000 - £55000 per annum + competitive: Progressive Recruitment: SAP Business...

Day In a Page

Read Next
 

The law is too hard on sexting teenagers

Memphis Barker
 

Obama must speak out – Americans are worried no one is listening to them

David Usborne
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
Climate change threatens to make the antarctic fur seal extinct

Take a good look while you can

How climate change could wipe out this seal
Should emergency hospital weddings be made easier for the terminally ill?

Farewell, my lovely

Should emergency hospital weddings be made easier?
Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

Crowdfunded novel nominated for Booker Prize

Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

Vladimir Putin employs a full-time food taster

John Walsh salutes those brave souls who have, throughout history, put their knives on the line
Tour de France effect brings Hollywood blockbusters to Yorkshire

Tour de France effect brings Hollywood blockbusters to Yorkshire

A $25m thriller starring Sam Worthington to be made in God's Own Country
Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

Will The Minerva Project change the face of higher learning?

The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
The 10 best pedicure products

Feet treat: 10 best pedicure products

Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

Commonwealth Games 2014

Great Scots! Planes and pipers welcome in Glasgow's Games
Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

Jack Pitt-Brooke

Manchester City and Patrick Vieira make the right stand on racism
How Terry Newton tragedy made iron men seek help to tackle their psychological demons

How Newton tragedy made iron men seek help to tackle their psychological demons

Over a hundred rugby league players have contacted clinic to deal with mental challenges of game