Unemployment levels expected to fall

 
Pa10 September 2013
WEST END FINAL

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Unemployment looks set to continue its gradual decline when official figures tomorrow show more people finding work amid a recovering economy.

Economists on average expect the number of unemployed Britons to fall by around 26,000 in the quarter to July, as brighter economic prospects trickle through to the jobs market.

Some economists expect the jobless rate to tick down to 7.7 per cent in the three months to July - significant as Bank of England governor Mark Carney's new forward guidance policy is tied to the threshold.

But figures from the Office for National Statistics (ONS) are also likely to show price hikes continue to outstrip meagre wage rises, which are forecast to rise by 1 per cent on a year earlier.

That would compare with inflation of 2.8 per cent, which continues to be pumped up by rising bills and fuel prices.

The unemployment rate has been given greater significant since the Bank said it will only consider raising interest rates if it drops to 7 per cent, barring a spike in inflation.

Its radical new policy aims to give households and businesses confidence to spend, safe in the knowledge that rates will remain low for around three years.

The so-called claimant count, which measures people claiming jobseeker's allowance, is forecast on average to drop by around 20,000 between July and August to about 1.42 million.

Analysts at Investec Securities said they expect the figures to "continue the run of good news on the UK's gathering momentum", adding that a falling unemployment rate will further ignite speculation over earlier-than-expected rate rises.

But the TUC has warned that rising employment is largely being driven by low-paid and temporary jobs, reflecting an "increasingly insecure, vulnerable workforce".

Chancellor George Osborne declared yesterday that the UK economy is "turning a corner", in his most upbeat assessment yet about the country's prospects.

Economists increasingly expect growth of 1 per cent in the third quarter, up from 0.7 per cent in the second quarter, after a flurry of upbeat economic data.

IHS Global Insight chief UK and European economist Howard Archer said he expects the jobs market to show "modest improvement" because of the strengthening economy and firming business confidence.

He sees the unemployment rate hitting the 7 per cent threshold in late 2015 - about a year earlier than the Bank's forecast.

But economists at consultancy Capital Economics said even if the jobless rate dips, "this doesn't alter our view that it will take a long time for the unemployment rate to fall to the MPC's 7 per cent threshold".

They said: "More jobs do not automatically imply a fall in the unemployment rate due to a growing workforce.

"Other indicators suggest that growing demand is being accommodated more by rising productivity than by firms taking on workers."

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