The number of people unable to find full-time work appears to have peaked. Photograph: Getty Images.
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New employment data suggests an approaching uplift for the UK economy

The decline since November 2013 was the largest 3 month fall since 1992.

The wisdom of the Bank of England’s decision to move the goalposts on forward guidance, away from the single metric of the ILO 3-monthly average unemployment rate to a more holistic range of economic indicators, has been brought into stark relief by the latest employment data, released on 16 April.

The headline rate fell unexpectedly to 6.9 per cent, its lowest level since Feb 2009, from 7.2 per cent last month, and well below the expectated 7.1 per cent. The more contemporaneous Claimant Count Rate, fell to 3.4 per cent in March from 3.5 per cent in February, presaging further falls in the ILO rate next month and taking this measure to its lowest level since November 2008 - the pit of the financial crisis.

The unemployment rate for the single month of February was 6.6 per cent, meaning that the decline since November’s 7.4 per cent was the largest 3 month fall since 1992, and an unemployment rate of 6.6 per cent is getting uncomfortably close to the Bank of England’s own NAIRU estimate of 6 to 6.5 per cent, so that one of her new favoured indicators, the amount of labour slack in the economy, may be disappearing rather quickly.

The last BOE Quarterly Inflation Report, in February, forecast unemployment at 6.9 per cent at the end of Q1. Well, we’re already there and sure to be below that if March’s single month reading stays below 7.0 per cent.

However, there are pockets of less impressive news buried within the report. Average Weekly Earnings for February, now very closely watched by the BOE as a leading indicator for inflation, disappointed a little at 1.7 per cent, up against an expectated 1.8 per cent, but were still up 1.4 per cent in January - and I would expect further increases over the coming months; for the first time in nearly six years, weekly earnings have finally overtaken inflation. There is still some way to go however; as at Q4 real wages were still 6.5 per cent below their pre-crisis peak. The average work week fell, somewhat inexplicably, from 32.2 hours to 32.0, which won’t impress the Monetary Policy Committee.

Finally, although the rise in employment, at 239k, and in the participation rate, from 63.6 per cent to 63.8 per cent, both looked like great news, one can pick holes and point to the composition of the 239k gain; only 45k were full-time employee jobs and self-employment grew by 146K in the three months to February. However, it looks like number of people working part-time because they could not get a full-time job has peaked, which is very healthy.

All-in-all, these statistics alone, nor the recent raft of other encouraging indicators such as house prices, PMI’s, Industrial Production and Retail Sales, will not yet be enough to break the MPC’s unanimity when it comes to keeping rates at 0.5 per cent, but if the trend continues - with annualized growth approaching 4 per cent, then the minutes of June or July’s MPC meeting could make very interesting reading.

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

Photo: Getty
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George Osborne's mistakes are coming back to haunt him

George Osborne's next budget may be a zombie one, warns Chris Leslie.

Spending Reviews are supposed to set a strategic, stable course for at least a three year period. But just three months since the Chancellor claimed he no longer needed to cut as far or as fast this Parliament, his over-optimistic reliance on bullish forecasts looks misplaced.

There is a real risk that the Budget on March 16 will be a ‘zombie’ Budget, with the spectre of cuts everyone thought had been avoided rearing their ugly head again, unwelcome for both the public and for the Chancellor’s own ambitions.

In November George Osborne relied heavily on a surprise £27billion windfall from statistical reclassifications and forecasting optimism to bury expected police cuts and politically disastrous cuts to tax credits. We were assured these issues had been laid to rest.

But the Chancellor’s swagger may have been premature. Those higher income tax receipts he was banking on? It turns out wage growth may not be so buoyant, according to last week’s Bank of England Inflation Report. The Institute for Fiscal Studies suggest the outlook for earnings growth will be revised down taking £5billion from revenues.

Improved capital gains tax receipts? Falling equity markets and sluggish housing sales may depress CGT and stamp duties. And the oil price shock could hit revenues from North Sea production.

Back in November, the OBR revised up revenues by an astonishing £50billion+ over this Parliament. This now looks a little over-optimistic.

But never let it be said that George Osborne misses an opportunity to scramble out of political danger. He immediately cashed in those higher projected receipts, but in doing so he’s landed himself with very little wriggle room for the forthcoming Budget.

Borrowing is just not falling as fast as forecast. The £78billion deficit should have been cut by £20billion by now but it’s down by just £11billion. So what? Well this is a Chancellor who has given a cast iron guarantee to deliver a surplus by 2019-20. So he cannot afford to turn a blind eye.

All this points towards a Chancellor forced to revisit cuts he thought he wouldn’t need to make. A zombie Budget where unpopular reductions to public services are still very much alive, even though they were supposed to be history. More aggressive cuts, stealthy tax rises, pension changes designed to benefit the Treasury more than the public – all of these are on the cards. 

Is this the Chancellor’s misfortune or was he chancing his luck? As the IFS pointed out at the time, there was only really a 50/50 chance these revenue windfalls were built on solid ground. With growth and productivity still lagging, gloomier market expectations, exports sluggish and both construction and manufacturing barely contributing to additional expansion, it looks as though the Chancellor was just too optimistic, or perhaps too desperate for a short-term political solution. It wouldn’t be the first time that George Osborne has prioritised his own political interests.

There’s no short cut here. Productivity-enhancing public services and infrastructure could and should have been front and centre in that Spending Review. Rebalancing the economy should also have been a feature of new policy in that Autumn Statement, but instead the Chancellor banked on forecast revisions and growth too reliant on the service sector alone. Infrastructure decisions are delayed for short-term politicking. Uncertainty about our EU membership holds back business investment. And while we ought to have a consensus about eradicating the deficit, the excessive rigidity of the Chancellor’s fiscal charter bears down on much-needed capital investment.

So for those who thought that extreme cuts to services, a harsh approach to in-work benefits or punitive tax rises might be a thing of the past, beware the Chancellor whose hubris may force him to revive them after all. 

Chris Leslie is chair of Labour's backbench Treasury committee.