U.K. unemployment claims fell at their fastest pace in three years in June, adding to evidence the economic recovery is gaining momentum.
Jobless claims fell 21,200 from May to 1.48 million, the biggest drop since June 2010, the Office for National Statistics in London said today. Economists forecast a decline of 8,000 based on the median of 23 estimates in a Bloomberg survey. Unemployment as measured by International Labour Organisation standards fell 57,000 to 2.51 million in the three months through May. The rate was unchanged at 7.8 percent.
The figures provide a further boost to Prime Minister David Cameron, whose Conservative Party has gained in opinion polls as the economy improves. With a general election less than two years away, the government is counting on growth accelerating as inflation continues to erode household incomes and hundreds of thousands more public-sector jobs are axed to help narrow the budget deficit.
“We’ve had a very decent confluence of events,” said Philip Shaw, an economist at Investec Securities in London. “The labor market numbers are positive and reflect the favorable part of the economy in the first half. With pay growth running so far below inflation there’s still a question mark over the recovery.”
Presiding over his first policy-setting meeting, Bank of England Governor Mark Carney united officials as Paul Fisher and David Miles dropped their call for more stimulus in favor of a “mixed strategy” involving guidance on the path of interest rates, minutes of their July 3-4 discussions published today show.
The Monetary Policy Committee voted 9-0 to keep the target of its bond-purchase program at 375 billion pounds ($566 billion). All nine also voted to keep the key interest rate at a record-low 0.5 percent.
The pound strengthened against the dollar and was trading at $1.5189 at 9:53 a.m. London time, up 0.2 percent on the day. The benchmark 10-year gilt yield was 6 basis points higher at 2.32 percent.
Britain’s economic growth probably quickened in the second quarter to 0.6 percent, the fastest pace in almost a year, the National Institute of Economic and Social Research said last week. Recent surveys of services, manufacturing and construction all strengthened in June.
Government measures to help support home buyers are also having an effect, spurring house prices and boosting confidence.
Still, today’s report underlined the pressure on households, with average earning growing just 1.7 percent in the three months through May at a time when inflation is running at 2.9 percent. Excluding bonuses payment, annual pay growth was 1 percent.
The economy’s 0.3 percent growth in the first quarter was partly due to consumers savings less of their income, underscored by a drop in the savings ratio to 4.2 percent, the lowest in four years.
Jobless claims have fallen for eight straight months, taking the jobless rate to 4.4 percent, the lowest since December 2010, the ONS said. In May, claims fell 16,200 instead of the 8,600 drop previously reported. ILO unemployment posted its biggest quarterly fall since October last year. The number of people in work rose 16,000 to 29.7 million.
While youth unemployment fell by 20,000 in the latest quarter, the number of people looking for work for longer than a year rose to its highest since 1996, the statistics office said.