17th September 2014
The unemployment rate fell to 6.2% over the three months to the end of July, its lowest level since 2008, figures from the Office for National Statistics show.
The number of people out of work fell by 146,000 to 2.02 million over the quarter. When bonuses are excluded from the figures, average earnings in the May to July period rose by 0.7% from a year earlier.
The ONS says the number of people claiming Jobseeker’s Allowance in August fell by 37,200 to 966,500.
Over the year the number of unemployed had fallen by 468,000 – the largest annual fall in unemployment since 1988.
The number of people in employment rose by 74,000 to 30.61 million over the quarter, though this is a relative small quarterly increase.
Chancellor George Osborne said the figures were another important step on the road to full employment.
However Labour’s shadow employment minister Stephen Timms said: “Pay excluding bonuses today is the lowest on record. Under this government wages after inflation have already fallen by over £1,600 a year since 2010 and by next year working people will have seen the biggest fall in wages of any Parliament since 1874.”
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The further marked fall in unemployment points to a still rapidly tightening labour market, thereby seemingly boosting the case for an interest rate hike sooner rather than later by the Bank of England.
“But only a modest increase in earnings growth from very low levels suggests that there is still an appreciable amount of labour market slack with little pressure on inflation coming from pay.”
The minutes of the 3 and 4 September MPC meeting, released today, show Ian McCafferty and Martin Weale arguing for increasing the bank rate 25 basis points from its all-time low of 0.5 per cent to 0.75 per cent for the second meeting in a row.
The MPC said that it was concerned that temporary weakness in the eurozone could become more prolonged and revive worries about some euro zone governments’ ability to repay debts.
“This could damage confidence and disrupt financial markets and, as a result, the downside risks to UK growth in the medium term had probably increased,” the MPC said.
The Bank of England revised their growth forecast to 0.9% but it believes there may be a slowdown in the fourth quarter.
The MPC notes that average earnings remain very weak, and the MPC said this could be partly due to the long-term unemployed re-entering the labour market for low-skilled work.