Britain’s unemployment rate tumbled to its lowest level in four-and-a-half years, fast approaching the Bank of England’s threshold level for considering a hike in interest rates.
The jobless rate plunged to 7.4 percent in the three months to October, the Office for National Statistics said on Wednesday.
Economists taking part in a Reuters poll had forecast the rate would remain unchanged at 7.6 percent.
The BoE has made unemployment a central part of its plan to nurture Britain’s economy back to health by keeping interest rates at a record low. The Bank has said it will not think about raising borrowing costs until the jobless rate falls to 7 percent.
However, as the recovery has picked up speed, BoE Governor Mark Carney has stressed that unemployment hitting 7 percent would not be an automatic trigger for a rate hike, and that the recovery needs to deepen before stimulus can be rolled back.
“Nearly 1 million more people are out of work than in the years before the financial crisis, and the economy remains 2.5 percent smaller than it was in 2008,” Carney told members of Britain’s House of Lords on Tuesday.
Last month the BoE forecast unemployment could hit 7 percent as soon as this time next year, if interest rates stay unchanged, though its preferred scenario – which factors in the market’s bets on rate rises – points to 7 percent unemployment only in late 2015.
At 7.4 percent, Britain’s unemployment rate is at its lowest level since the February-April period of 2009, and was down from 7.6 percent in the three months to September.
An ONS official said rounding effects mean the size of the fall was recorded at 0.3 percentage points, a decrease which has not been seen before.
October’s claimant count was revised to show a drop of 42,800, a bigger than previously reported fall, the ONS said.
The number of people in work rose by 250,000, the biggest increase since May-July 2010, and a 99,000 fall in unemployment was the biggest drop since June-August 2000.
Despite the fall in unemployment, many people in work are not seeing an improvement in living standards.
Average weekly earnings growth including bonuses picked up by 0.9 percent in the three months to October compared with a year earlier, a slight improvement on the three months to September. Excluding bonuses, pay grew 0.8 percent.
By contrast, inflation in October was 2.2 percent before it fell back to 2.1 percent in November
Reuters