IT IS testimony to the speed of the UK economic recovery that only last summer Bank of England governor Mark Carney believed it would probably take up to three years for UK unemployment to fall from a rate then of 7.8 per cent to 7 per cent.
The statement created waves because, under his policy of giving forward guidance, the governor said such a fall was necessary before the BoE would consider raising interest rates from historic lows.
However, the latest data suggests Carney was too pessimistic. The Office for National Statistics says unemployment fell sharply to 7.1 per cent in the three months to November.
So, in barely half a year, the jobless figure has fallen to within a whisker of the trigger point for taking stock on interest rates rather than the few years envisaged by the central bank. Forecasting, eh?
Carney has got it right that the UK recovery remains solid rather than stellar. The economy remains 2 per cent smaller than it was at the time of the financial crisis five years on.
So, it is still far from certain that borrowing costs will rise in short order. But it surely now looks unfeasibly distant for a rise in rates to be delayed to late 2015 or 2016. The minutes of the Bank’s monetary policy committee, also out yesterday, are far from hawkish.
The International Monetary Fund earlier this week pencilled in notably stronger growth forecasts for the UK in 2014, among the highest of any major western nation.
From manufacturing and construction to financial services and notable pockets of the high street, the UK rebound looks to be increasingly bedded in rather than tentative.
Two things may stay the Bank’s hand on raising rates, however. One is specifically to do with the unemployment figures: many people are working part-time rather than full-time, and the jobless figure among young people – at 20 per cent – remains unacceptably high.
Carney will not want to choke gathering momentum through hasty removal of monetary stimulus. Secondly, economists believe that the recovery is too dependent on consumer spending rather than the healthier stamina of rising investment and exports.
So, despite the latest very cheering employment statistics, I suspect we are likely to see a period of masterly inactivity by the central bank.
Business breaking cover over breaking up
A HEAD of steam is building in both the City and business against the possibilities of the UK leaving the European Union and Scotland departing the UK.
Virtually every week some trade body or major business is going public with their view that the UK is better inside the EU camp rather than outside, and that a Scottish vote for independence would carry significant business risks.
The British Bankers’ Association now apparently believes the split of powers between London and Brussels is broadly right. And consumer giant Unilever, a global behemoth, has said unsubtly that it would consider cutting its investment in the UK if the country quit the EU.
The CBI, meanwhile, has warned of the economic and business dangers of Scotland going its own way, while some in the food industry recently claimed the price of food in Scottish supermarkets might rise because of unsubsidised extra distribution costs if there was a vote for independence. The battle for minds on both issues has started in earnest.