16th April 2014
The number of people out of work in the UK has fallen by 77,000 in the year to February a five year low. The unemployment rate is now at 6.9% of the adult population with 2.24m people out of work according to the Office for National Statistics.
While this level of unemployment is below the Bank of England’s original forward guidance target – since abandoned – experts say the high level of part time workers and continued high youth unemployment mean interest rate rises are still some way off.
Average earnings in the three months to February grew 1.7% compared with a year earlier while inflation has fallen to 1.6% in March.
This is the first time since the spring of 2010 that the increase in average wages has exceeded the Consumer Price Index.
Howard Archer, chief UK and European economist at IHS Global Insight says it is still “more likely than not” that the Bank’s Monetary Policy Committee (MPC) will not raise rates until 2015.
“Not only has the Bank of England repeatedly stressed that an unemployment rate of 7% is not a trigger for an automatic interest rate hike, but it modified its forward guidance policy in February to focus on the amount of slack it considers to be in the economy, based on a broad range of indicators”, he said.
“The Bank of England will likely regard the fact that there are 1.421 million people who are working part-time because they cannot find a full-time job as evidence that there is still substantial slack in the labour market.”
David Kern, chief economist at the British Chambers of Commerce, says: “Concerns do persist. The youth unemployment rate is still much too high at 19.1% and, while long-term unemployment is falling, more than 800,000 people have been unemployed for more than a year. These concerns aside, it is clear that the recovery is on the right track.”