UK unemployment rises to 7.2%

The jobless rate rose for the first time in 13 months, securing the case for low interest rates following yesterday's below-target inflation figure of 1.9%.

Morningstar 19 February, 2014 | 11:52PM
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Unemployment in the United Kingdom has risen to 7.2%, putting to rest any question of an interest rate rise. Economists expected the jobless figure to stick at 7.1% -- just 10 basis points off the unemployment target rate at which Bank of England governor Mark Carney originally said he would consider raising the base rate.

But last week Carney confirmed in his inflation report that rates would be staying low for some time to come, and this week's economic indicators backed up his plans. Yesterday's inflation announcement revealed the Consumer Price Index had fallen to below the government target for the first time since November 2009, and a higher jobless number today also points toward a low-rate environment.

Jeremy Cook, chief economist at foreign exchange company World First, said yesterday's inflation number alongside this jobs figure would mean rate hikes beginning in the second quarter of 2015 and no sooner.

"It's fair to say that the UK jobs market has been tough to predict since the middle of last year, but this is the first time we have seen a surprise move upwards in the figure since the beginning of 2013," Cook said.

"Overall, the trend is still one of an improving jobs market, but the Bank of England will be keen to emphasise that any further improvements will materialise more slowly than they have in recent months, the closer we get to the long-run average of 6.5%."

The Office of National Statistics also revealed this morning that the UK GDP increased by 0.7% in the fourth quarter of 2013 following three consecutive quarters of positive growth. As a result, GDP is estimated to have increased by 1.9% between 2012 and 2013. However, growth still lags pre-recession levels, as GDP in the final quarter of 2013 remains 1.3% below its peak in the first quarter of 2008.

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