UK unemployment holds steady at 7.8pc

By Rebecca Clancy

While unemployment held steady, which had been expected, the outlook was brighter, as the number of people looking for work fell 4,000 to 2.51 million in the second quarter, according to figures from the Office for National Statistics. 

Jobless claims declined for the ninth straight month to 29,200 to 1.44 million, taking the rate to 4.3 percent, the lowest since February 2009 and the number of people in employment rose by 69,000 in the three months to June, compared to the three months to March. 

Meanwhile, the number of unemployed men grew by 15,000 to 1.44 million, as the number of unemployed women fell, down 19,000 to 1.07 million. 

Today's unemployment figure has added significance after the Bank of England Governor Mark Carney last week announced that interest rates would not be raised from their record low of 0.5pc until the unemployment rate fell below 7pc. 

Unveiling a radical policy of “forward guidance” that has never been tried in the UK, the Bank’s new Canadian Governor committed to keep rates on hold until the official measure of unemployment falls from the current rate of 7.8pc to 7pc. 

Mr Carney said it meant that more than 750,000 extra jobs would have to be created before the end of 2016 for rates to start rising again. 

Howard Archer, chief economist at IHS Global, said he expected unemployment to hit the 7pc threshold late 2015 or early 2016 and expected Mr Carney to start raising rates in early 2016. 

"We expect unemployment to head down gradually over the coming months, but the decline may well be limited by rising productivity (as a number of companies make more use of under-utilized workers they have been holding on to) and by an increasing workforce as some previously discouraged workers return to the jobs market," he added. 

"Further job losses will also occur in the public sector." 

The public sector has already started to see job loses, with the number of people working down 22,000 to 5.7 million in March, compared with December. 

Conversely the number of people employed in the private sector increased by 46,000 to 24.06 million. 

Pensions Minister Steve Webb said: "This growth has been driven by a rise in permanent, private sector jobs, which suggests businesses are feeling positive about the future." 

However, the ONS figures also showed that households are continuing to feel the squeeze, with prices rising quicker than the averagely wage. 

Average weekly earnings, excluding bonuses, rose just 1.1pc in the three months to June compared with the same period last year. Including bonuses wages rose by 2.1pc, the first time it has past the 2pc mark since late 2011, but still below the rate of inflation at 2.8pc. 

ONS said the relatively high rate for April to June reflects that many businesses paid bonuses in April to take advantage of the government's tax cut, from 50pc to 45pc. 

TUC general secretary Frances O'Grady said: "Today's figures show that it's boom time again for the super-rich, while the dole queues are getting longer for young people. 

"The bounce in bonus-led pay rises show that the super-rich have taken full advantage of the Chancellor's telegraphed tax cut. Meanwhile, ordinary workers are struggling on as the cost of living increases three times faster than wages." 

The figures also show that one in five people who are currently out of work have been so for more than two years. 

The ONS reported that 474,000 people have been unemployed for more than two years, up 10,000 from the three months to March, while 909,000 have been unemployed for more than one year, up 7,000. 

The figures were worse among 16 to 24-year-olds, with youth unemployment up 15,000to reach 973,000, while the number of people out of work for more than two years rose by 10,000 to 474,000, the highest since 1997. 

Despite the negative youth and long-term unemployment figures, David Morel, director of Tiger Recruitment, said the job market was "definitely moving in the right direction". 

"Slowly but surely the employment rate is moving up," he said. "Encouragingly, almost all sectors of the economy are hiring more than they were 12 months ago. The recovery of the jobs market is well balanced and this bodes well for the future." 

"Noticeably, there has been nowhere near the usual lull in activity during July and August," he added. 

John Salt, director of totaljobs.com, agreed and said: "This month’s statistics provide another hint that the UK is headed towards a recovery, one that’s set to accelerate over the next year with the Bank of England’s pledge to keep rates low." /Telegraph