The UK’s jobless rate may have been much lower than estimates suggested at the end of last year, according to data that could bolster pressure on the Bank of England to hold off on interest rate cuts.
The Office for National Statistics (ONS) said new experimental results from its Labour Force Survey, which is used to determine the official unemployment rate, showed a rate of 3.9% for the three months to November.
It had previously been measured at 4.2%.
The update, which was based on new population estimates, continued to come with a big health warning as ONS number-crunchers move to bolster the quality of the data.
It expected that work to be completed by September.
The survey, which has suffered from low participation rates since the pandemic, is also used to determine other figures such as wage increases – also crucial pieces of information for the Bank of England in the current economic environment.
Policymakers in Threadneedle Street are currently weighing the timing of interest rate cuts following progress in the battle against inflation.
Financial markets currently expect borrowing costs to start to fall back from May.
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While a lower unemployment rate is good news on the face of it, it will only fuel worries among rate-setters at the Bank of about inflationary risks ahead.
The Bank is anxious to limit demand in the economy – helping to keep a lid on the pace of price growth.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the outlook for employment was weaker than the ONS figures indicated.
“More recent evidence suggests that unemployment has begun to rise at a faster pace,” he wrote.
“For instance, the number of redundancy notifications received by the Insolvency Service in the four weeks to January 21 was 17% higher than in the same period a year ago.
“In addition, our seasonally adjusted measure of the number of Google searches for phrases including “redundancy” – a good leading indicator for the official measure of layoffs – exceeded its average level in the second average by 24% in January and its 2015-to-19 average by 28%.
“Accordingly, we still think that the MPC likely will reduce Bank Rate to 4.50% by the end of this year, from 5.25%, with the first step down coming in May, though the risks that the initial cut comes later are rising.”
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