Rates may rise as jobless falls
UK unemployment unexpectedly fell in November by the most in almost two years and wage growth accelerated, adding to the case for higher interest rates, the statistics office said yesterday.
The number of Britons claiming jobless benefits fell by 5,700 to 950,800, the biggest drop since January 2005, the Office for National Statistics said in London. Economists expected unemployment claims to rise by 4,000, according to the median estimate in a Bloomberg survey of 30 economists. The claimant count rate of unemployment was unchanged at three percent, Bloomberg News said.
Falling unemployment and bigger wage gains may add to concern that workers will boost pay demands at talks starting next month. Inflation quickened to the fastest pace in at least nine years last month, prompting investors to raise bets on the Bank of England raising interest rates next year.
“The labor market is rebounding strongly and that points to wages picking up,” said Raj Gunaratna, an economist at 4Cast Ltd, a research group in London. “The report gives the Bank of England more reasons to hike interest rates.”
The pound and interest-rate futures rose on speculation that the central bank will raise its benchmark rate again next year after two increases since August to five percent, a five-year high.
Higher energy bills pushed consumer prices up an annual 2.7 percent in November, the most since the index was introduced in January 1997, the statistics office said.
Wages growth excluding bonuses rebounded to an annual 3.8 percent from August through October from the 3.5 percent gain in the previous period, which was the slowest since July 2003.
UK employees at Ford Motor Co and Rolls Royce Plc, as well as air traffic controllers, are set to receive pay increases of more than four percent, said Ken Mulkearn, the editor of Incomes Data Services.
About 4,200 people working for financial-services companies and law firms in London will get bonuses of more than one million pounds (US$1.97 million) this year, according to the Centre for Economics and Business Research.
Still, an influx of migrant workers and rising unemployment have kept a lid on workers’ average pay so far. Around half a million immigrants came to the UK from Eastern Europe last year, keeping wages “subdued,” and damping consumer prices, Deputy Governor Rachel Lomax said.