Figure may prompt interest rate rise
Record number in jobs as Scottish unemployment falls to six-year low
The number of people in employment has reached a record high of 2,625,000, according to Labour Market Statistics published today by the Office for National Statistics.
These figures for the period between October and December also show the level of unemployment fell by 15,000 over the quarter and is now below 150,000 for the first time since 2009.
The data may push Bank of England policymakers towards raising interest rates as unemployment was a factor taken into account under the forward guidance policy adopted under governor Mark Carney.
Deputy First Minister and Finance Secretary John Swinney welcomed the latest figures that show:
- Scotland is outperforming the UK with higher employment, lower unemployment and higher participation rates
- Youth unemployment fell to its lowest level and rate in five years, whilst youth employment increased over the year
- Inactivity rates are at the lowest on record at 21.3%
- Female employment increased by 20,000 over the quarter to 1,301,000 – the highest female employment level on record
- The female participation rate is also at a record high of 75.5 per cent, above the UK rate of 72.5 per cent
Mr Swinney said: “Today’s figures are hugely encouraging and demonstrate a robust, more inclusive and active Scottish workforce supporting our economy which in itself is going from strength to strength. We must remain absolutely focused on continuing to deliver those better economic prospects and vigilant about challenges within different sectors of the economy.
“Scotland is outperforming the UK on all three headline labour market indicators with employment continuing to increase and unemployment down. We have moved up two places in European youth unemployment rate comparisons at a time when we strive to create not just more, but better, jobs for those living in Scotland.
“Female employment and participation are both at a record high, and above UK rates. The gap between male and female employment rates in Scotland has shrunk to a record low of four percentage points – compared to 9.5 percentage points in the UK. Not only is the employment rate in Scotland higher, we are also seeing more women in employment.
“This clearly demonstrates that the Scottish Government can do much to secure economic growth, tackle inequality and protect public services within the limited powers we have, but we want to – and can – do more.
Andy Willox, the Federation of Small Businesses’ (FSB) Scottish policy convenor, said: “Hardworking Scottish businesses are continuing to deliver for the economy and can rightly be proud of today’s great job figures. However, we must remember that some local economies haven’t felt the recovery, whereas other areas – such as my native Aberdeen – face new challenges to their prosperity.
“Our latest report highlighted the economic importance of Scottish home-based businesses. The profile of our business community is changing and, if Scotland wants to create jobs and drive prosperity, we must dismiss the nostalgia and focus on supporting the businesses we have.”
UK unemployment fell 97,000 to 1.86 million, a rate of 5.7%. Average wage growth (including bonuses) is running at 2.1%.
Minutes of the Bank of England’s monetary policy committee meeting last month showed two members thought the decision to hold interest rates was “finely balanced.”
The members were not named but Martin Weale and Ian McCafferty voted to increase rates from August through to December. The most prominent advocate of looser monetary policy has been David Miles, who steps down later this year.
Last week the Bank of England raised the possibility for the first time that it could cut interest rates below 0.5% if inflation turns out weaker than expected, although Mr Carney said it was more likely that rates would rise.
The minutes showed all nine members of the committee thought it was likely that rates would rise over the next three years.
John Cridland, CBI Director-General, said: “The recovery is now established and businesses are continuing to create more full time jobs. While it’s good to see unemployment falling we still need to see more young people finding roles, especially those that help them develop their skills and progress up the earnings ladder.
“Pay growth is now well ahead of inflation, and a focus on improving productivity from businesses will help keep this on track.”
James Sproule, chief economist at the Institute of Directors, said: “Today’s strong employment figures and continuing signs of real wage growth will be welcome news to thousands of businesses and millions of employees. The growth in jobs over the last few years has been particularly impressive, and, as competition for talent heats up, wages will continue to rise, with two-thirds of IoD members planning pay rises at least in line with inflation over the coming months.
“Throughout the recession, employers and employees co-operated to save jobs, by forsaking pay rises and cutting back hours. We are now seeing the benefits of this mature and responsible approach. Businesses are recovering strongly, as they benefit from having maintained an experienced and skilled workforce, and staff are being rewarded with modest and sustainable pay rises and bonuses.
“Average earnings in this period were boosted by strong year-end bonuses across a broad range of sectors from construction and manufacturing to finance and business services, suggesting good performance across the economy. However, raising bonuses and not salaries implies some companies are still cautious about increasing their fixed costs.”
Andy Scott, associate director of FX advisory services at foreign currency firm, HiFX, said: “This morning’s Bank of England minutes and unemployment data appear to be in line with what we heard at last week’s inflation report.
“Whilst there are some differences of views among the monetary policy committee, the most likely move in interest rates will be an increase rather than a cut over the next few years. They see wage growth picking up which will help push inflation back higher and today’s figures support that view, with total pay including bonuses rising by a faster-than-expected 2.1%. (UK) Unemployment also unexpectedly fell to 5.7% thanks to solid hiring in December.
“There’s still a lot of uncertainty over the forecast horizon but the message from the Bank of England seems to be that they could raise interest rates earlier than markets expect i.e. this year. We still see that as a relatively slim chance given all of the other downside factors that look set to weigh on consumer price inflation and with the U.S. and Chinese economies slowing, it seems prudent to keep monetary policy expansive.
“Sterling reacted positively to the both the minutes and the employment data as it reintroduces the possibility of a rate hike this year. One thing we haven’t heard the MPC mention yet however is the strength of sterling over the past year, which reached a multi-year high on a trade weighted basis – even though it’s weakened against the U.S. dollar. A strong currency when you’re faced with disinflation can add to the problem, and we see this as something that’s likely to register on the BoE’s radar in the months ahead.”