The Office for National Statistics (ONS) said that unemployment in the three months to October was 2.39 million, or 7.4% of the working age population, down from 7.6% in the three months to September.
When the policy was announced in August, the Bank’s monetary policy committee expected that to take three years; but their latest prediction is that it could be as soon as 2015.
“The jobless rate is falling far faster towards the Bank of England’s 7% threshold than policymakers envisaged when establishing the marker back in the summer,” said Chris Williamson, chief economist at City data-provider Markit. “Employment is surging higher and unemployment collapsing in the UK as the economic recovery has moved into a higher gear.”
Sterling jumped after the unemployment data was released, rising by almost a cent against the dollar, to $1.635, as investors bet on an earlier-than-expected rate rise. A stronger pound was one of the concerns of the Bank’s nine-member monetary policy committee at their December meeting, according to minutes also published on Wednesday.
The MPC pointed out that the value of sterling has risen by 9% against the currencies of the UK’s major trading partners since March, and warned that “any further substantial appreciation of sterling would pose additional risks to the balance of demand growth and to the recovery”.
The minutes suggested the latest evidence pointed to a “burgeoning recovery” in the UK; but one which was unlikely to prove sustainable unless productivity picked up, finally lifting real incomes. The MPC voted unanimously to leave rates on hold at their record low of 0.5%, and the stock of assets bought under quantitative easing unchanged at £375bn.
MPC member Martin Weale suggested last week that if unemployment is falling rapidly at the point when the 7% threshold is breached, he would regard that as a reason to tighten policy.
The details of the jobs data reinforced the view that the labour market has strengthened markedly over the past six months. The number of people employed across the economy has hit a fresh record high above 30 million, while there are more vacancies than at any time since the summer of 2008, before the UK slipped into recession.
On the claimant count, which measures the number of people in receipt of out-of-work benefits, unemployment fell to 1.27 million in November, its lowest level since January 2009.
John Philpott, director of consultancy the Jobs Economist, described the data as “wonderful”. “The quarterly 250,000 net increase in total employment is as big as one might once have expected in a full year. Employment is up in all parts of the UK, except Northern Ireland, with a sharp rise in job vacancies helping an additional 50,000 16 to 24-year-olds into work. And while the overall figure of more than 30 million people in work still leaves the UK employment rate (72%) below the pre-recession rate (73%) it is a landmark worth celebrating,” he said.
Despite the improving conditions in the labour market, there is little evidence that the prolonged squeeze on wages is easing. The ONS said total pay rose at an annual rate of 0.9% in October, or 0.8% including bonuses. That compares with an inflation rate of 2.2% in the same month, suggesting that on average, living standards are continuing to fall. Frances O’Grady, general secretary of the TUC, said: “These are undoubtedly positive figures, but we should not forget how far we still have to go to restore pre-crash living standrards through better pay and jobs”.
Rachel Reeves, Labour’s shadow work and pensions secretary, said: “Today’s fall in unemployment is welcome, but families are facing a cost-of-living crisis and on average working people are now £1,600 a year worse off under this out-of-touch government.”