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U.K. Unemployment Remains At 6-Year Low

UKunemployment 031815

The U.K. unemployment rate remained at the lowest level in more than six years and the employment rate hit the highest since 1971 during three months to January.

Elsewhere, policymakers of the Bank of England in the March meeting observed that the strength in the pound raises the risk of a prolonged period of low inflation. The committee unanimously decided to keep the monetary policy unchanged at the meeting held on March 4 and 5.

The ILO jobless rate came in at 5.7 percent in three months to January, the same rate as in October to December period, the Office for National Statistics said Wednesday.

It was expected to fall to 5.6 percent. Nonetheless, the rate was below the 6 percent seen in the quarter ending October and this was the lowest rate in more than six years.

There were 1.86 million unemployed people, down 102,000 from October. At the same time, the employment rate came in at 73.3 percent, the highest since records began in 1971.

The claimant count fell to 2.4 percent in February, in line with forecast, from 2.5 percent in January, ONS reported.

The number of people claiming jobseeker's allowance decreased for 28 consecutive months. Jobless claims declined 31,000 to 791,200 in February. It was expected to decline by 30,000.

Average earnings including bonuses increased by 1.8 percent in three months to January from the prior year, but slower than a 2.2 percent rise forecast by economists. Excluding bonuses, earnings rose 1.6 percent.

The earnings growth rate well exceeded the 0.3 percent consumer price inflation.

The labor market is still tightening gradually and rising real wages are still giving a boost to consumer spending, said Vicky Redwood, chief UK economist at Capital Economics.

However, as the MPC pointed out pay growth is still below the rates that are consistent with inflation returning to its target, the economist said.

The Monetary Policy Committee of BoE voted 9-0 to retain the benchmark rate at a historic low of 0.50 percent and quantitative easing at GBP 375 billion, the minutes showed today.

All members agreed that it was appropriate to leave the stance of monetary policy unchanged, although two members regarded this month's decision as finely balanced.

There was a range of views over the most likely path of Bank Rate in future, but all members agreed that it was more likely than not that Bank Rate would increase over the next three years, the minutes said.

Members said stronger growth prospects in the U.K. than in the euro area, might continue to put upward pressure on the pound. This had the potential to prolong the period for which inflation would to remain below the target.

The sterling strength versus the euro is likely persist for the next month or so, but as the May 7 election approaches, political uncertainty is likely to creep into the equation, ING Bank NV economist James Knightley said.

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