Unemployment falls to 7.1%, just short of BoE's target for interest rate rise

The number of people out of work in the UK has fallen to 7.1%, increasing pressure on Bank of England governor Mark Carney to clarify whether the bank will meet its plan to raise interest rates when unemployment reaches 7%.

The number of people out of work fell by 167,000, to 2.32million in the three months to November, according to the Office for National Statistics, a much bigger fall than economists had forecast.

In the three months to October, unemployment stood at 7.4%.

The shock figures mean the Bank of England’s prediction that unemployment will only fall to 7% by the end of 2015, now appear to be a major miscalculation.

The figures will put pressure on Carney to elucidate the bank’s “forward guidance” policy on interest rates, which have remained at 0.5% since March 2009.

Neil Carberry, CBI director of employment and skills, said: “These figures show that our jobs market is working well, with unemployment dropping faster than in less flexible countries. It’s particularly encouraging to see so many people finding full-time jobs, with more people moving from part-time to full-time work, and an increase in young people finding jobs as well.

“While the overall picture is very positive, productivity is still below recession levels and not growing, and sustainable increases in wages can only be linked to improved productivity.”

Mark Beatson chief economist at the Chartered Institute for Personnel and Development said: “Looking beneath the headline figures, half of the last quarter’s employment growth was due to a sharp increase in self-employment.  The number of people who were working part-time because they could not find a full-time job has now started to fall.  And probably the best news of all is that we have seen noticeable falls in the number of young people unemployed and the number of people unemployed for over a year.”

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