Today the UK edged closer to that target as the unemployment rate slipped to 7.7%, down from 7.8% three months earlier. The number of people out of work stood at 2.49 million between May and July, down by 24,000 on the previous quarter, official figures from the Office for National Statistics showed.
Interest rates have been at a record low of 0.5% since March 2009, in an attempt to boost borrowing and stimulate economic growth. The Bank of England has suggested that rates may rise again in 2016, although a string of strong economic data has led some City analysts to speculate that interest rates may rise sooner.
The manufacturing sector saw its strongest growth in activity for two and a half years in August, and the UK service sector grew at its fastest pace in six years in the same month.
The latest pickup in the UK’s employment figures adds weight to indications that the British economy is slowly getting back on track. However, if unemployment continues to fall at the rate of 0.1% per quarter, the Bank of England’s prediction that interest rates will rise in 2016 is accurate.
There were 334,000 new jobs created in the year to June, the ONS said. With the housing market showing signs of an upturn, there was a 77,000 rise in the number of people employed in ‘real estate activities.’ Meanwhile the number of people claiming Jobseeker's Allowance fell 32,600 to 1.402 million, its lowest level since February 2009.
The pound surged against the euro and the US dollar following the release of the figures.
Nida Ali, economic adviser to the EY ITEM Club, said the falling unemployment rate echoes the positive developments in the wider economy. However EY doesn’t anticipate a rise in interest rates before 2016.
‘In our view, unemployment has peaked and should continue drifting down in the coming months. Having said that, with companies likely to have hoarded labour during the recession, we expect some payback in the form of weak private sector job creation and progress is likely to be slow. Contrary to market expectations, we only expect the unemployment rate to fall below the Bank of England's forward guidance threshold of 7% at the end of 2015 and the Bank Rate to increase in early 2016.’
Average pay, including bonuses, rose by 1.1% compared with the same time last year. However, wages are falling in real terms as inflation currently stands at 2.8%.