UK unemployment drops to 7-year low

Building-Work-Emerging-700x450.jpgUK unemployment has dropped to the lowest level since before the financial crisis hit, now standing at 5.3 per cent.

The latest employment data from the Office for National Statistics shows that for July to September 2015 unemployment has dropped to 5.3 per cent, from 6 per cent a year earlier. The rate is also lower than the 5.4 per cent seen in the three months to August, the 5.5 per cent in the three months to July and 5.6 per cent in the three months to June.

The latest figure marks the lowest level since March to May 2008, which experts say shows the robust recovery of the UK economy.

“Unemployment now stands at its lowest level since before the ravages of the financial crisis, signalling an economy which has already done a great deal of healing,” says Laith Khalaf, senior analyst at Hargreaves Lansdown.

“This picture looks even brighter when you consider we are now also seeing a significant rise in wages, which should be further boosted by the introduction of the national living wage next April.”

The data from the ONS also shows that regular pay, excluding bonuses, rose by 2.5 per cent in the three months to the end of September, down from 2.8 per cent the previous month. The figure is up on the 1.2 per cent growth seen in the same month last year.

However, this mixed data, which the Bank of England examines to gauge the health of the economy, gives no clear signals on when increase rates will rise.

“While inflation is close to zero this presents a conundrum for the Bank of England. On the one hand, the recovery in the labour market suggests interest rates should rise, on the other, Mark Carney is currently writing monthly letters to the Chancellor to explain why inflation is so far below target,” says Khalaf.

“While a marked rise in employment and fall in the unemployment rate to 5.3 per cent points to a further tightening of the labour market which is supportive to interest rates rising sooner or later, the marked slowdown in earnings growth in September itself argues against an early rate hike,” says Howard Archer, chief UK and European economist at IHS Global Insight.