You're hired! Unemployment falls by most in 16 years

The jobless rate has fallen to just 0.1% shy of the 7% the Bank of England says it will consider raising interest rates at.

by Rachel Savage
Last Updated: 24 Jan 2014

Unemployment has fallen to 7.1%, its lowest in over four years and a whisker away from the 7% level that the Bank of England said it would consider raising interest rates at.
The jobless rate dropped by 0.5%, or 167,000, in the three months to the end of November, the figure's biggest quarterly fall since 1997. Unemployment is now at 2.32 million, 0.3% lower than the three months to October, according to the Office for National Statistics.
The fall, which was sharper than economists had expected, will pile pressure on the Bank of England as unemployment approaches the magic 7% mark. Last summer, governor Mark Carney issued forward guidance saying the Bank wouldn’t look at raising the interest rate from its historic low of 0.5% until the jobless rate reached that level.
However, the minutes of the Bank’s January policy meeting, released this morning, said that the Monetary Policy Committee sees no immediate need to raise rates even if unemployment falls to the 7% threshold soon.
The number of people in work hit a record high for the third month in a row, rising 280,000 to 30.15 million in September-November. Youth unemployment fell even more than the rest of the labour market, down 1.1% from the previous quarter, although an eye-watering 18% of 16-24 year olds are still unemployed.
The number of economically inactive 16-64 year olds was down, dropping 22,000 to 8.9 million. However, that was only a 0.1% fall, meaning over one in five British adults are still entirely out of the labour market.
Businesses have been saying they’re keen to keep on hiring too, in separate surveys from accountants PwC and BDO. The good economic news just seems to keep on coming – yesterday the IMF upgraded its forecast for UK growth this year to 2.4% from 1.9%.
George Osborne has got plenty to crow about and support his policy of continuing to cut government spending then. Business leaders and politicians descending on Davos today are also going to be pretty cheery.
However, wage growth is still decidedly sticky, at 0.9% for the second month in a row. Compared with inflation, which is currently at 2% (admittedly bang on the government's target), that means we’re going to keep feeling poorer in real terms. If the sunny economic figures don’t start lining everyone’s pockets soon, Osborne could be forced to get out his policy wand...


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