U.K. jobless claims unexpectedly fell in December and a quarterly measure of unemployment also dropped, underlining the resilience of the labor market in the face of a weak economic recovery.
Unemployment claims declined by 12,100 from November to 1.56 million, the lowest since June 2011, the Office for National Statistics said today in London. In the quarter through November, unemployment measured by International Labour Organisation methods fell to 7.7 percent, the lowest since the three months through April 2011. The report also showed that wage growth slowed.
The jobs market remains the bright spot in the economy, which may have shrank in the fourth quarter and is facing the threat of a triple-dip recession. The Bank of England’s Monetary Policy Committee voted 8-1 to leave its bond-purchase program unchanged this month and said today recent developments “strengthened” the view among some officials that no more stimulus is needed.
“It continues to be surprising that employment is growing so strongly when the economy is flat-lining,” said Samuel Tombs, an economist at Capital Economics Ltd. in London. “The weakness of pay growth helps. The economy may grow this year, albeit slowly.”
The median forecast of 28 economists in a Bloomberg News Survey was for jobless claims to increase by 500 in December. The unemployment rate on that basis remained at 4.8 percent.
Employment rose 90,000 during the quarter through November, taking the total to 29.7 million, the ONS said. That’s the highest since records began in 1971. The employment rate of 71.4 percent is at the highest since February-April 2009. The ILO unemployment level fell by 37,000 to 2.49 million, a 10th consecutive decline. The unemployment rate has come down from a peak of 8.4 percent in December 2011.
The labor-market report showed that consumers remain under pressure from subdued wage increases. Weekly pay growth slowed to an annual 1.5 percent in the three months through November, while pay excluding bonuses rose 1.4 percent, the least since June 2010. That compares with inflation of 2.7 percent.
At the same time, threats to the labor market remain. Carmaker Honda Motor Co. said this month it will eliminate as many as 800 jobs in the U.K. this year. Thousands of jobs are also at risk after retailers including HMV Group Plc (HMV) and Blockbuster Entertainment Ltd. entered administration.
In the minutes of its Jan. 9-10 meeting, the BOE said “substantial headwinds to recovery remained,” though it noted “modestly positive recent developments.” Governor Mervyn King said yesterday that a “gentle recovery” may be under way.
BOE policy makers also warned in the minutes that the sterling real exchange rate “might be above the level compatible with the necessary rebalancing of the economy.”
“Sterling has been the favored whipping boy of monetary policy makers for years,” said Philip Rush, an economist at Nomura International Plc in London. “So this is not a new tune, but the volume is being turned up.”
Separately today, Australian consumer prices gained less than economists forecast last quarter, pushing down the local dollar and giving the central bank scope to reduce interest rates. The trimmed mean gauge of core prices rose 0.6 percent from the prior quarter, compared with the median forecast for a 0.7 percent gain. The broader consumer price index advanced 0.2 percent, half the forecast increase.
In the euro area, an index of consumer sentiment probably rose to minus 26 this month from minus 26.5 in December, economists said before a report today. The Bank of Spain said that the nation’s recession deepened in the last quarter of 2012, with gross domestic product falling 0.6 percent from the previous three months, when it slipped 0.3 percent.
European Central Bank President Mario Draghi said yesterday the “darkest clouds” over the euro area have lifted due to decisive policy steps last year. King used similar language in his speech, saying strengthening banks and implementing structural reforms could help “roll back the black cloud of uncertainty darkening the outlook for demand.”
The Washington-based International Monetary Fund is scheduled to release an update to its World Economic Outlook today. The U.S. Mortgage Bankers Association will report mortgage applications for the week ended Jan. 18, while a survey predicted the U.S. Federal Housing Finance Agency will say home prices gained 0.7 percent in November from the previous month.
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