Unemployment hits 24-year low

UNEMPLOYMENT in the UK fell to 2.7% in June, its lowest level since August 1975. The Office of National Statistics said the number of people claiming the jobseeker's allowance in June fell 9,600 to 850,900, beating expectations of a 7,000 decline.

The claimant count, down from 2.8% in May, has now fallen for 13 consecutive months. However, figures from the International Labour Organisation, the Government's preferred measure of unemployment, increased by 6,000 in the three months to May to 1,432,000.

The ILO rate, based on the three months to May, was unchanged on the quarter at 4.8%, giving the UK the second lowest jobless figures among G8 countries. Only Japan is lower at 4.7%. It was, however, the first quarterly increase in the rate since September 2003.

The upbeat claimant count figures may cement expectations that the Bank of England's rate-setting monetary policy committee will raise the cost of borrowing another quarter point in August, taking its base rate to 4.75%.

The MPC has raised interest rates by a quarter point on four occasions since November, fearing that rampant consumer spending and lessening slack in the economy are stoking inflation.

Wage figures from statistics office will also provide food for thought for the MPC. Average earnings, excluding bonuses, were at an annual rate of 4.2% May compared with 4.1% in April – the fastest rate since May 2002.

Including bonuses, average earnings increased by 4.3%, unchanged from May's.

However, some economists said that following yesterday's statistics revealing only a modest rise in inflation to 1.6%, there was little reason for the Bank to hike rates.

'Not only is the trend in inflation still generally benign but there is precious little evidence that the drop in unemployment is fuelling a meaningful upward drift in pay settlements,' said Simon Rubinsohn, chief economist at broker Gerrard.