Bank of England unanimous on interest rate freeze

The Bank of England's Monetary Policy Committee (MPC) agreed unanimously that interest rates should stay at 0.5% this month, minutes of the meeting show.

All nine members voted for no change, even though inflation is currently at 3.5%, well above the 2% target.

However, some MPC members noted that the weakening of the pound could lead to inflation risks.

The MPC was unanimous in keeping the £200bn quantitative easing (QE) programme unchanged.

Under QE, the Bank pumped new money into the economy by buying assets, such as government bonds, in an attempt to boost lending by commercial banks.

Currency move

The jump in CPI inflation to 3.5% in January was viewed as being caused by temporary factors, including the return of VAT to 17.5%.

The notes of the meeting said inflation was set to remain above the 2% target for some months to come, and that there were certain risks from the weak pound, which has now fallen in value by 25% since 2007.

George Buckley, chief UK economist at Deutsche Bank, said the picture painted by the minutes was pretty much what was expected.

"We were expecting that it was going to be 9-0 for both rates and QE, which turned out to be the case," he said.

Posted at 09:05PM Mar 17, 2010 by Kelly Board in UK Economy News  |  Comments[0]

Unemployments Drops Once Again

UK unemployment has fallen even further to 7.8% over the past three months according to the latest figures.

The total number of people unemployed fell by around 33000 over the period now stands at 2.45 million.  Despite this however, long term unemployment numbers, people without work for more than 12months, have risen over the same period by about 61000.

The number of people that are now claiming Jobseeker’s Allowance has also fallen by a similar amount to the total unemployment rate, around 32300.  The total number claiming Jobseeker’s Allowance now stands at 1.59 million.

A further fall was seen in the number for younger people, 18 to 24 year olds fell by 34000 to 715000, however amongst over 50’s, unemployment has seen a slight rise by 14000 up to 398000.

"This is a positive surprise and not before time," said Colin Ellis, Economist at Daiwa Capital Markets, in response to the unemployment figures.

He also said that due to the poor labour market currently, workers are making themselves more flexible.

"Workers are probably willing to accept lower wages or shorter hours to hang on to their jobs."

Strangely, the number of people actually in employment has also fallen by around 56000 down to 28.86 million.

The Office of National Statistics (ONS) has said recently that there is a growing number of people who are now considered ‘economically inactive’ is what has been the main cause of the rise in both employment and unemployment.

In this category are people who have stopped seeking work, along with people with long term illness and students.  There has also been a recent significant rise in the number of people who are applying to university places leading to a rise in student numbers.

Meanwhile Jeegar Kakkad, senior economist at EEF, the manufacturers' organisation, said: "Although the figures show that job losses in manufacturing are at their lowest since the recession began, the fall in employment increases the likelihood of a jobless recovery."

"One word sums up the latest official jobs figures: confusing," said Dr John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development (CIPD).

"Unemployment is sharply down, however you measure it. Yet there also 54,000 fewer people in work, with full-time jobs particularly hard hit.

"The apparent paradox is explained by a very sharp rise of 149,000 in the number of economically inactive people, with the number of students surging by 98,000. Jobless young people are thus turning to study in their thousands to avoid the dole."

Despite the overall fall throughout the country, there were some very diverse figures when looking at regional totals.  Scotland saw a fairly substantial rise in unemployment, up 16000, while London saw a drop of 20000.

Reacting to the figures, Work and Pensions Secretary Yvette Cooper released a lengthy statement saying, "The fall in unemployment for the third month in a row is very welcome, but we should remain cautious.

"We're not out of the woods yet and we are still determined to do more to support jobs and help the unemployed this year.

"However, now is not the time to cut back on support for jobs. We know things will be difficult for some time, and unemployment in the 80s and 90s rose for years after the recessions finished.

"That is why we plan to increase help to get people back into jobs this year, not cut it back, so we can support the jobs of the future."

Conservative shadow work and pensions secretary Theresa May said the figures were encouraging, but that she was concerned about the lack of new jobs.

"Obviously it's very... it's welcome news that unemployment figures are going down," she said.

"But of course we mustn't lose sight of the fact that there are still getting on for two-and-a-half million people unemployed and one in five young people can't find a job.

"So we've still got... welcome news that unemployment is going down but we've still got a long way to go to get out of the damage that's been done by Labour's recession."

Meanwhile, Steve Webb, Liberal Democrat Work and Pensions spokesman, said: "These figures are only part of the story, we would rather these figures go down rather than up.

"But the number of [economically inactive] people who have just given up, that is a real concern."

He added: "The priority for an incoming government is to create new jobs, worthwhile jobs, not training the unemployed for jobs that don't exist."

Posted at 12:04PM Mar 17, 2010 by Marc Stenton in UK Economy News  |  Comments[0]