U.K. Unemployment Seen Unchanged as BOE Puts Jobs in Spotlight
U.K. unemployment was probably unchanged in the second quarter in the first release of jobless data since Bank of England Governor Mark Carney put it at the center of a plan to guide investors on interest-rate policy.
The unemployment rate based on an International Labour Organization measure was 7.8 percent, according to the median of 30 economists in a Bloomberg News survey. Carney said this week the BOE plans to keep its benchmark rate at 0.5 percent until the jobless rate falls to 7 percent, something it doesn’t forecast will happen before the fourth quarter of 2016.
“Post-BOE guidance, this release takes on an unprecedented level of significance,” said Philip Rush, an economist at Nomura International Plc in London. “Perhaps worryingly for the Monetary Policy Committee, it has good form in being strong.”
The data will be released at the same time as minutes of the MPC’s Aug. 1 meeting, when officials decided to take the unprecedented step of providing guidance on policy. The record will also show how the nine MPC members voted on interest rates and quantitative easing and if any dissented on the introduction of the new policy strategy.
The Office for National Statistics will publish the labor-market report at 9:30 a.m. on Aug. 14. It will also show that jobless claims fell 15,000 in June, leaving the claimant count rate at 4.4 percent, according to a separate survey.
The BOE guidance has three caveats, including two linked to price stability. Data on Aug. 13 will probably show that inflation slowed to 2.8 percent in July from 2.9 percent in June, according to the median of 35 estimates in a survey. The MPC, which has an inflation target of 2 percent, said the guidance will no longer hold if policy makers decide medium-term consumer-price gains are likely to breach 2.5 percent or inflation expectations are no longer well-anchored.
Britain’s economy is showing signs of strengthening, with indexes of manufacturing, services and construction all improving in July. A report yesterday showed the U.K.’s trade deficit narrowed in June and exports rose to a record in the second quarter.
Economists have cut their forecasts for unemployment through 2015 as the economy recovers. They see the jobless rate at 7.7 percent in 2014 and 7.6 percent the following year, according to Bloomberg’s latest monthly economic survey, published yesterday. That’s down from a July forecast of 7.8 percent for both years.
“The jobless rate will be center stage in MPC decisions, carrying a much greater weight than generally perceived until now,” London-based Citigroup Inc. economists Michael Saunders and Ann O’Kelly said in a note to clients. “The MPC’s statement focuses monetary policy more on closing the output gap and cutting unemployment rather than simply aiming for the 2 percent inflation target.”
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