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UK unemployment at lowest levels in a decade

Data from the Office for National Statistics shows that UK unemployment has fallen unexpectedly to its lowest level in almost a decade, with wage growth slowing less than economists had forecast.

Unemployment fell to 5.1%, the lowest since January 2006. Wage growth in salaries rose 1.9% for the year to November; the slowest increase since February 2015. Economists in a Bloomberg survey had predicted a 1.8% rise [1].

The data shows that the actual employment rate hit 74%, marking the highest number since records began in 1971 [3].

Although the decrease in the jobless rate is positive for the economy, the slowdown in pay growth is likely to delay a possible interest rate rise.

The Governor for the Bank of England (BoE), Mark Carney, ruled out an early rise in interest rates because of the weak UK growth and unpredicted position of the global economy earlier this week [2].

Carney said a sustained improvement in wage growth would be one of the factors in the BoE’s decision to raise interest rates, and would like to see growth of at least 3% per annum [2].

Ruth Miller, Economist at Capital Economist, agrees: “Today’s UK labour market figures showed a further slowdown in wage growth, suggesting that an interest rate hike is still some way off” [4].

Although this is disconcerting for the economy in the short term, measures are in place to ensure the economy can grow back stronger.

Prime Minister David Cameron has stated: “Unemployment is now below where it was before the recession [and that] we must stick to our plan to keep delivering jobs and security for people” [1].

 

[1] Bloomberg. ‘UK unemployment hits decade as labor market tightens’. bloomberg.com

[2] BBC. ‘UK jobless rate at 10-year low but wage growth slows’. bbc.co.uk

[3] Financial Times. ‘UK employment rate hits new record high’. ft.com

[4] The Guardian. ‘UK unemployment falls but wage growth weakens’. theguardian.com