In the most upbeat job market news for some time, the Office for National Statistics said the UK unemployment rate has now fallen to 6.9%, its lowest level for five years. This was down from 7.2% on the previous quarter as the number of people out of work fell 22,000 to 2.24 million.
This means the UK's unemployment rate is now below the 7% level set by the Bank of England last August for considering an increase in interest rates. And it comes as the UK's inflation rate fell to 1.6% in March, which was a four-year low and below the Bank's target of 2%.
However, economists generally do not expect the Bank to increase interest rates until at least the first half of next year. Last week the Bank of England kept UK interest rates at a record low of 0.5% for the 61st month since March 2009. Respected economic forecaster the EY Item Club said today it expects the Bank to maintain that figure until the third quarter of 2015 as it will need to ensure that loans 'do not become too stretched and that affordability is scrupulously checked.'
Employment is now at a record 30.39 million in the UK, up 239,000 from the previous three months. Almost two-thirds of the increase came from people registered as self employed – up to a record 4.5 million – suggesting people are still not finding it easy to find full-time work. A separate survey commissioned by the Resolution Foundation said that more than a quarter of people who became self-employed in the last five years would prefer to be employed by someone else.
Meanwhile average earnings in the three months to February grew 1.7% compared with a year earlier. It's the first time since spring 2010 that wage rises has exceeded the Consumer Price Index (CPI) measure of inflation.
Overall, the data suggests Britain's economy is well on track to recovery after the deepest recession in recent history. But BoE governor Mark Carney will be careful not to rock the boat by raising interest rates too early. First-time buyers are currently borrowing an average of 3.4 times their earnings, which is manageable while interest rates remain low. But these borrowers could struggle when interest rates rise. A wave of repossessions and a fall in house prices is the last thing the UK economy needs.