UK unemployment rate drops to 7.1%


Ed Miliband clashes with David Cameron over the economy at Prime Minister's Questions.

The UK unemployment rate has dropped to 7.1%, close to the point at which the Bank of England has said it will consider raising interest rates.

The number of people out of work fell by 167,000 to 2.32 million in the three months to November, the Office for National Statistics (ONS) said.

The ONS also said the number of people claiming Jobseeker's Allowance fell by 24,000 to 1.25 million in December.

The issue dominated Prime Minister's Questions in the House of Commons.

Labour party leader Ed Miliband said: "We welcome the fall in unemployment because whenever an individual gets back into work, it's good for them and good for their family."

But he argued that average wages were £1,600 a year lower than they were in the general election year of 2010, meaning that many families were worse off.


Even with a growing economy, these figures from the labour market exceeded all expectations.

A fall of 167,000 in the unemployment level over three months hasn't been seen in 17 years. An unemployment rate of 7.1% has not been registered since early 2009.

It is clear that the British economy is creating jobs at a much faster rate than most analysts had predicted.

The Bank of England is among those who are junking their earlier forecasts. Last August the Bank expected the jobless rate to stay above 7% till at least 2016. But now five months later it has already fallen to within a whisker of that 7% benchmark, set by the Bank as the time when they would start considering interest rate rises.

The noises from policymakers suggest they won't start thinking about a rate rise for some time after that 7% rate is reached. But they have some explaining to do about where their "forward guidance" policy has now got to.

Thirteen million people in Britain are living in poverty, he claimed, often within working families.

Prime Minister David Cameron said the figures showed "youth unemployment coming down, long-term unemployment coming down, the claimant count coming down".

It was "the biggest ever quarterly increase in the number of people in work in our country," he said.

The chancellor, George Osborne, speaking from the World Economic Forum in Davos, said the rise in employment is evidence that his economic plan is working.

Interest rates

The fall of 167,000 was the biggest drop since the autumn of 1997. The number of 16-24 year olds out of work fell by 39,000 from the previous three-month period to 920,000.

The ONS figures also showed that the number of people in employment increased by 280,000 to reach 30.15 million.

The bigger-than-expected drop in the number of people out of work has raised the possibility that interest rates may rise sooner than previously thought.

George Osborne MP: "It's evidence that our long-term economic plan is working"

Mr Osborne refused to be drawn on the prospect of interest rates rising, saying it was a decision for the Bank of England.

The Bank of England has said it might consider increasing interest rates from 0.5% when unemployment hits 7%.

The jobs figures pushed up the value of the pound, which hit a year-high against the euro of 1.2222 euros and climbed to a near three-week high against the dollar of $1.6553.

'Staggeringly strong'

"Especially pleasing is that the fall in unemployment is coming both from declining short and long-term unemployment, and a large decline in unemployment amongst 18-24 year olds," said David Tinsley from BNP Paribas, who described the overall figures as "staggeringly strong".

There has been a "significant" fall in unemployment, says Nick Palmer from the Office for National Statistics

Many analysts had not expected the unemployment rate to hit 7% until much later this year or next, and the significant fall in the three months to November is likely to mean many will reassess their forecasts.

A recent snapshot of views conducted by the BBC at the start of the year found that more than half the 28 economists polled thought the unemployment rate would not hit 7% until 2015.

"The rate of unemployment in the UK continues to collapse," said Chris Williamson, chief economist at Markit.

"All eyes turn to the Bank of England to see how forward guidance will be modified to account for the far-faster than anticipated improvement in the labour market."

But the latest minutes from this month's meeting of the Bank of England's Monetary Policy Committee (MPC), also published on Wednesday, indicated that the Bank is in no rush to raise rates.

Pound Sterling v Euro

Last Updated at 01 Aug 2014, 04:36 ET *Chart shows local time GBP:EUR intraday chart
£1 buys change %
1.2604 -

Given that inflation had returned to the 2% target rate last month, and that "cost pressures were subdued... members therefore saw no immediate need to raise the Bank rate even if the 7% unemployment threshold were to be reached in the near future", the notes said.

The MPC also said "it was likely that the headwinds to growth associated with the aftermath of the financial crisis would persist for some time yet", reinforcing the fact it is in no rush to raise rates.

The ONS also said that average weekly earnings between September and November, both including and excluding bonus payments, rose by 0.9% compared with a year earlier.

For now, therefore, wage rises are not an inflationary pressure within the economy, and cannot be used as an argument for raising interest rates.

Separate figures from the ONS showed that UK government borrowing fell in December to £12.1bn, down £2.1bn from a year earlier.

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Graph showing industry sectors reporting biggest increases in vacancies
  • House sales show the biggest percentage increase in job vacancies, but in terms of actual jobs, it represents about 3,000 up on December 2012. House sales reached their highest level for five years in the final quarter of 2013.
  • The motor trades sector has reported the biggest increase in actual job vacancies, up by 18,000 on a year ago. 2013 was the best year for new car sales since 2007.
  • Overall job vacancies have increased by 75,000 since 2012.
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  • rate this

    Comment number 111.

    and still Balls and Millipede in total denial that were heading the right way. The way they go on you would think they actually want high unemployment and recession - hang on a minute, they do! That would suit them fine!

  • rate this

    Comment number 110.


    How does the statistics being rigged everywhere help matters? Statistics exclude long-term unemployed, people who've given up looking for work, and those who have finished education but not started work yet. Include these and you're closer to 14%. (Current measure is called the U3 rate in the US, the method described above is also official and called the U6 rate, though rarely used

  • rate this

    Comment number 109.

    Why should my taxes be used to subsidise greedy companies who don't pay their staff a minimum wage, forcing them to go cap in hand to the state for Income Support ?

    Also, why aren't the Coalition outlawing Zero Hours contracts ?

  • Comment number 108.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 107.

    Fiction, absolute fiction......

  • rate this

    Comment number 106.

    Unemployment down.. Yes maybe but this does not mean a thing. Zero contract hours and the disabled pushed off benefits, people unable to pay their basic bills IS the reality.

    Duncan Smith was proven to have misrepresented figures (in layman's terms he LIED)

    So predictable. In fact I said as much on here last week.

    I am so glad I didn't try and buy a house.. Watch out those with a mortgage!

  • rate this

    Comment number 105.

    For those who celebrate this, take a moment to think about the North East, where the unemployment figure has risen to 10.3%.

  • rate this

    Comment number 104.

    What's all the fuss about the Bank having to look at rates when unemployment hits 7%.
    Read Mark Carney's lips when he first gave his forward guidance:
    We will NOT look at rates before unemployment reaches 7% is NOT a promise to do so when rates rates reach 7%.
    Just wait until 7% is breached and only then ask what he will do

  • rate this

    Comment number 103.

    I recall unemployment being lower than this in the late 1990 early 2000s, with low levels of inflation and modest interest rates. Then, the Tories whinged about x, y and z. But now the same good news is out there, and once again, house prices are increasing well above inflation and wages, are we meant to view the situation any differently?

  • rate this

    Comment number 102.

    More Tory propaganda lining their pockets, the tickety-boo boys have cracked you in half like I've never seen. 1 million youth unemployed, the borders flooded, no crime but the Prisons are full, you've got a higher murder rate than the Bronx! ATOS rules OK ask the disabled not to sign on the Dole even though they can't walk. It's the worst government you've ever had they've pulled your pants down!

  • rate this

    Comment number 101.

    There's no way in a gazillion years Mr Cameron (although having no control over interest rates ) will allow interest rates to increase before the next election. Why? If they did it would send millions into debt/further debt and allow Labour into power.

    Just a thought

    Also, unemployment will increase in Jan/Feb 2014 after all the seasonal workers are laid off.

  • rate this

    Comment number 100.

    32. I like your comment, but being made to feel grateful on minimum wage is perhaps not the answer. However, it is better to tackle the job market from an employed position than an unemployed position; just don’t burn bridges on your way up. Well Done on the Job!!

  • rate this

    Comment number 99.

    I know several people who are unemployed yet cannot claim benefits due to certain limits which have been implemented these past 3 years.

    It is obvious that these people are considered to be in employment, even though many are relying on food banks. The rest are part-time or on zero hour contracts.

  • rate this

    Comment number 98.

    I see people are complaining about statistics again. The labour statistics are based on an international standardised approach so that different countries can be readily compared. It has all been just have to spend 5 minutes looking for it. But don't let the facts get in the way of your complaining.

  • rate this

    Comment number 97.

    Can't believe so many of you going "Great News". Are you really that naive? People are being sanctioned more than ever before, those on zero hour contracts will get treated like they are on a conveyor belt and people who have been on JSA for so long are forced into work related activities which takes them off the unemployment statistics. It's horrific news made worse by people STILL falling for it

  • rate this

    Comment number 96.

    sounds like good news, but, is it?
    I suspect most of the new jobs created are either part time or low paid or both.This news comes on a day when research shows young people are now having to live with Mom & Dad sometimes till they are 34. Rents and the price of property are out of reach. So something does not add up.

  • rate this

    Comment number 95.

    What is the betting that the BoE MPC now reduce their unemployment target to 6.5%? I can't see interest rates rising at all this year. Too many people remain in too much debt for interests rates to be raised.

  • rate this

    Comment number 94.

    Such bad news. Vote labour, to ensure this never happens again.

  • rate this

    Comment number 93.

    But this can't be true. It is not working, it can't happen. I know, because the two Eds told me so, and we know how competent Labour are when it comes to the economy.

  • rate this

    Comment number 92.

    I run my own engineering design firm and we have gone from me + one pt assistant in 09 to 11 employees. We have had a hard time hiring the right staff last yr but now have a deal with local uni design school. Over half of our revenue comes from abroad but in the last 6 months there has been a wonderful upturn in UK orders. This is great news and long may it run


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