The figures for unemployment over the last three months of 2013 were released by the Office for National Statistics recently. Poring over the various stats, the underlying figure saw unemployment rise unexpectedly to 7.2%, a rise of 0.1%. Confusingly, the number of people out of work dropped by 125.000 over the same period, although experts believed that the overall rate would remain static.
Digging a little deeper, the number of people claiming Jobseekers’ Allowance also fell, dropping by 27,600 to 1.22 million over January. This particular stat represented the 15th monthly drop in a row. In the meantime, there were also reported falls in the levels of both youth unemployment and long-term unemployment, both possible indicators of a recovery in the job market taking place.
Markets not pleased
While that and the total number of people out of work are sure to encourage the coalition government, the ONS didn’t sound so positive. Speaking to the media, Nick Palmer, the organisation’s senior labour market statistician said:
"The main conclusion that should be drawn from these latest figures is that the rate at which unemployment has been falling is likely to have slowed down."
Meanwhile, in early trading, Pound Sterling fell in value against the US Dollar, possibly as a result of this surprising news. The fact that the overall level of unemployment has actually gone up may give traders the impression that the UK’s economy isn’t completely out of the woods just yet, possibly putting a spanner in the works as far as any recovery is concerned.
Part-time boom
Many believe that the positive figures relating to unemployment have been fuelled by a rise in the number of part-time roles being created. For many desperate jobseekers, part-time work is the best that they can hope for. In actual fact, there are 1.4 million people in part-time employment who want to take on a full-time role, only to be thwarted by the lack of such jobs.
Interestingly, the highest number of job vacancies since 2008 was recorded, standing at 580,000. At the very least, it shows that there are a limited number of opportunities available, although a large proportion of that number are part-time roles. Concerns over the prevalence of ‘zero-hour’ contracts with unspecified working hours still pervade, skewing employment figures even further.
Bank ready to move
At present, the unemployment rate is pretty close to the 7% target set by the Bank of England. This is important because the Bank said that, should the jobless rate fall below the 7% mark, they may feel compelled to implement a rise in the base interest rate from its current 0.5% level. As the job market is recovering at a faster pace than expected, this could happen sooner rather than later.
Rosemary Okolie, Market analyst at City Index said: “The small rise in unemployment rate to 7.2% was somewhat surprising given that expectations were that the rate would likely stay the same. It does, however, reinforce belief that interest rates are likely to stay put for the time being.
“The initial interest rate rise target was an unemployment rate of 7%, however additional variables were added last week, putting at bay an imminent interest rate rise. The latest unemployment rate reinforces that view. That will continue to offer benefits to many – home buyers for instance would certainly benefit from continued low interest rates, particularly at a time when many variable rates are starting to rise on expected rate rises in the near term.”
Huge Consequences
The markets are watching how the employment market fares over the coming months. Should it happen, the consequences of a rate rise could be huge for the UK economy, affecting everything from lending to retail-sales. For now, focus is firmly on whether the job market will see recovery quicken up again.
