UK unemployment declined unexpectedly by 99,000 to 2.39m people in the three months to October, according to the Office for National Statistics (ONS).
The unemployment rate, measured by International Labour Organisation methods also fell to 7.4% from 7.6% in the quarter through September – moving closer to the Bank of England’s target of 7%. Economists had predicted the rate to remain unchanged.
The central bank has said that it will not even consider raising interest rates until the rate falls to 7% and that it is not an automatic trigger. Until then it intends to try and better understand how the economy’s supply side may evolve – particularly as regards the outlook for productivity.
‘Despite the sharp drop in unemployment, we believe the odds are still strongly in favour interest rates staying at 0.50% all through 2014,’ said Howard Archer, IHS Global Insight’s Chief UK and European Economist.
‘For what it is worth, our current view is that the Bank of England will start to raise interest rates gradually from the third quarter of 2015.’
The ONS report also showed the number of those employed climbed by 250,000 to a record 30.1m during the quarter through October, the biggest increase since July 2010.
It compared to the previous quarter’s 177,000 jobs and the consensus forecast of 165,000.
In November, jobless claims fell 36,700, more than the 35,000 that was forecast.
‘We expect unemployment to head down steadily over the coming months, although the decline will likely limited by rising productivity (as a number of companies make more use of under-utilised workers they have been holding on to) and by an increasing workforce as some previously discouraged workers return to the jobs market,’ Archer added.
‘Further job losses will also occur in the public sector (although it actually edged up 4,000 in the third quarter). Also significantly, we expect growth to ease back a little following the current surge in activity, although we expect activity to remain decent through 2014 and into 2015).’
Average weekly earnings gained at a 0.9% clip in the three months ended in October and versus a year ago, after October’s 0.8% rise (consensus: 0.8%).
Core average weekly earnings – which take out bonuses – increased at a 0.8% pace, the same as last month (consensus: 0.9%).