The announcement about jobless figures from the Office for National Statistics provided both good and bad news. The underlying figure revealed that the number of people out of work in the last three months of 2013 fell by 125,000, but when compared to the previous quarter, the actual unemployment rate rose slightly from 7.1% to 7.2%.
This mixed picture showed that the total number of people out of work had moved further away from the target of 7% set by the Bank of England, although 27,600 people had stopped claiming unemployment benefit. Not knowing what to think, the early reactions by the markets to the news seem broadly negative, with the GPBUSD falling in early trading.
Statistical minefield
About the contradictory set of figures, Nick Palmer, a senior labour market statistician from the ONS told the Guardian’s website:
“The latest unemployment rate is 7.2%, down 0.4 on the previous quarter. This is a comparison between the July-September and October-December three-month periods. It is higher than last month’s published figure of 7.1% for September-November. However, it is not directly comparable with the figure published this month…”
In the meantime, the good news is likely to provide the government with plenty of reason for encouragement, as the number of jobs being created appears to be growing, adding to their argument that a recovery is underway. However, a lot of the new jobs being created are classed as being ‘self-employed’, perhaps indicating that salaried roles aren’t quite so abundant.
Encouraging or not?
Two major issues concerning unemployment – youth unemployment and long-term joblessness – appear to be improving. Youth unemployment actually fell to its lowest rate for over two years, while a steady fall in long-term unemployment was also recorded last quarter. However, wage growth is still failing to keep pace with inflation.
That particular problem could give the markets less reason to feel encouraged, although the prospect of a rise in the BOE’s interest rate may come sooner rather than later, especially if the unemployment rate falls below the magic 7% barrier.
Surprise Announcement
Rosemary Okolie, Market Analyst at City Index said: “The small rise in unemployment rate to 7.2% was somewhat surprising given that expectations were that the rate would likely stay the same. It does, however, reinforce belief that interest rates are likely to stay put for the time being.
“The initial interest rate rise target was an unemployment rate of 7%, however additional variables were added last week, putting at bay an imminent interest rate rise. The latest unemployment rate reinforces that view. That will continue to offer benefits to many – home buyers for instance would certainly benefit from continued low interest rates, particularly at a time when many variable rates are starting to rise on expected rate rises in the near term.”