British employment figures show economic recovery moving up a gear: economists

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British employment figures show economic recovery moving up a gear: economists

(Xinhua) 08:01, August 15, 2013

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British unemployment figures showed signs of economic recovery stepping up a gear, economists said on Wednesday.

The figures from the Office of National Statistics (ONS) showed 29.78 million people in jobs, up 69,000 in Q2, 2013 over Q1, and up 301,000 from a year earlier.

The unemployment rate stayed at 7.8 percent Q1 to Q2, with 2.51 million jobless. However, this was down 49,000 over a year, about 0.2 percent down.

Unemployment figures have gained even more significance this month as the Bank of England (BOE) aims to keep interest rates at 0.5 percent at least until the unemployment rate has fallen to 7 percent, barring exceptions around inflation performance and financial stability. The BOE forecasts this will happen in Q3 2016.

George Buckley, chief UK economist with Deutsche Bank, said unemployment could fall faster than the BOE expected if economic growth recovered more quickly, or if weak productivity remained, which would require more jobs for any given level of output.

"Should the participation rate fall (if disillusioned workers leave the labour force) the unemployment rate could fall for 'bad' reasons," Buckley noted.

Buckley said: "Overall, this was a generally stronger report from an activity perspective."

Howard Archer, UK and Europe economist with IHS Global Insight, said the job figures were broadly encouraging, and that the labor market was increasingly benefiting from markedly improved economic activity and strengthening business confidence. "Record high and rising employment in turn is supportive to growth prospects over the second half of the year."

Archer said he expected unemployment to head down gradually.

He added, "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."

Further job losses will also occur in the public sector, said Archer, adding that he seriously doubted that the economy is set to race ahead although it does now appear to have genuinely stepped up a gear.

Archer said he forecast unemployment to drop to 7.6 percent by the end of the year, and 7.4 percent by the end of 2014, with the critical 7 percent mark forecast to be hit in late 2015 or early 2016.

For James Knightley, senior UK economist with ING, the figures also pointed to an earlier rise in interest rates.

"The unemployment rate remained at 7.8 percent as expected, with employment growth accelerating over the past three months supporting the view that interest rates are unlikely to remain at 0.5 percent until 3Q16, as suggested by the BOE," he said.

David Kern, chief economist for the industry body British Chambers of Commerce, said: "Despite some concerns, such as higher youth and long-term unemployment, the overall picture is one of a slowly improving labour market."

Kern said an unemployment rate at 7.8 percent was still a long way from the 7 percent figure at which the BOE MPC may consider increasing interest rates.