George Osborne will be cock-a-hoop. According to the latest statistics, joblessness is not only falling faster than expected, it has just recorded the largest quarterly drop since 1997. Indeed, unemployment is now at its lowest level since April 2009. Such easily quotable figures would be political gold dust in any event. Coming as they do just one day after the International Monetary Fund upgraded its growth forecasts for Britain for the year ahead, they can only put a spring in the step of a Chancellor keen to vindicate his policy of tough economic love and pour scorn on the “cost of living crisis” that Labour is relying upon to win it the next election.
Elsewhere in the policy-making firmament, however, such sharp falls in unemployment, while no doubt welcome in themselves, nonetheless create problems of their own. When the newly arrived Bank of England Governor, Mark Carney, launched his unconventional “forward guidance” policy last summer, he did so with the indication that the Monetary Policy Committee would (all things being equal) not be raising interest rates from their current historic lows until the unemployment rate fell below 7 per cent. Given that such an eventuality was not expected until the middle of 2016, the steer was considered to be a suitably long-term one. Except that now, less than six months later, joblessness stands at 7.1 per cent, within a whisker of the threshold.
Mr Carney always made clear that the 7 per cent was not a trigger but merely a guide. Furthermore, the most recent MPC meeting minutes, coincidentally also published yesterday, are explicit that the committee has no plans for a rate rise any time soon, whatever the labour market is doing.
Given that inflation is falling and, for all Mr Osborne’s triumphalism, the recovery remains fragile, the decision is most certainly the right one. It does, however, raise again the question that has dogged Mr Carney’s much-trailed communications revolution from the start. If Bank policy is to evolve in line with changing circumstances – as it unquestionably must – then does “forward guidance” serve any purpose at all?