Unemployment in Britain fell sharply again to fresh record lows in the three months to January but the re-emergence of big City bonuses pushed earnings growth to the highest in over two years. Data from the Office for National Statistics released on Wednesday showed the International Labour Organisation measure of joblessness tumbled by 33,000 in the three months to January to 1.436 million, just shy of a record low set in March to May 2001. But the unemployment rate dropped to 4.8 percent, the lowest since records began in 1984 and a figure handing a gift to Chancellor of the Exchequer Gordon Brown who was set to present his annual budget to parliament at 1230 GMT. "The labour market continues to benefit from the strength of the economy. The only disappointing element continues to be the decline in manufacturing employment," said Howard Archer, economist at Global Insight.
The news came just as the Bank of England's Monetary Policy Committee released minutes of its March interest rate meeting showing it voted 9-0 to keep borrowing costs unchanged at 4.0 percent this month, after raising them in two steps since November. The new unemployment rate is one of the lowest in the industrial world and comes in spite of a slowdown in the global economy over the past three years. The country's other measure of unemployment known as the claimant count, showed its ninth consecutive monthly fall, dropping by 6,600 to just 885,200, the lowest since 1975. The jobless rate was steady at 2.9 percent. There was also good news on the employment front as the numbers in work grew by a hefty 121,000 in the three months to January to a record high of 28.27 million. But average earnings growth unexpectedly surged to 4.4 percent in the period from 3.5 percent in the three months to December. That was the highest since September 2001 and pushed gilt and interest rate futures down on the perception that it made further interest rate rises more likely.
CITY SLICKERS TO BLAME
The ONS said the jump in earnings was mainly driven by the financial services sector with bonuses generally higher than a year ago. But they were also concentrated this year more in January than December or February, leading to the punchy January number. The private sector services earnings growth figure jumped to 4.8 percent from 3.1 percent the month before. Public sector wage growth, however, slowed for the fourth month running to 4.2 percent, the lowest since October 2002 and well down from the recent peak of 5.6 percent. The headline figure may not concern the Bank of England, however, as the ex-bonus underlying earnings figure came in at 3.6 percent in January, only marginally up from December's 3.5 percent.
The Bank's Monetary Policy Committee is usually fairly relaxed about earnings numbers below 4.5 percent and will probably suspect that the headline earnings figure will drop back once the bonus effect falls out of the figures. "While the rise in the headline average earnings figure looks alarming, the underlying figure is much more benign and there is still limited evidence that the tightness in the labour market is leading to a significant pickup in private sector earnings growth," said Archer. In the minutes of the March meeting, some MPC members again expressed their concern at the country's strong house price growth and debt accumulation by consumers, worrying that it raised the risk of a crash.///www.s.com