Comment: Jobless fall poses rates query

IT MIGHT be a defining moment for the firmness of the rebound from recession. The number of people out of work has fallen to its lowest in more than four years.

Martin Flanagan

More uncertain is whether the improving employment situation means historically low interest rates will soon be on the way up again.

The jobless total dropped 99,000 to 2.39 million in the three months to October, an unemployment rate of 7.4 per cent compared with 7.6 per cent a month earlier, the Office for National Statistics confirmed.

We are approaching that totemic 7 per cent rate which Bank of England governor Mark Carney has said will lead to an assessment of whether interest rates need to rise.

However, Carney has stressed hitting that milestone will not be an automatic trigger for a rise, merely a time to take stock on monetary policy.

One could envisage a situation where the Bank still kept rates on hold at such a time because caution on household spending and business investment continues and living standards remain under pressure. Otherwise the Bank could be open to criticism that we have a ‘feel bad’ recovery.

Even with such caveats, there is no way the latest jobless fall is anything other than good news.

The 250,000 jump in people in work to a record 30 million is robust; we are not fiddling at the employment margins with this data.

It had many economists adjusting their projections, with a consensus now beginning to crystallise that the magic 7 per cent unemployment rate could be hit by the back end of 2014.

Economic rebounds do not happen while unemployment is rising. So we are clearly on the right road. It is just unclear how fast we will travel.

Immigration conundrum is balancing act for Cameron

David Cameron was tweeting again yesterday, increasingly a given with the Prime Minister, who was justifiably cock-a-hoop with the good jobless news.

A tighter political rope for him to walk is staying onside with the business community while the broader mood music hardens against mass immigration into the UK from the European Union.

The standard business argument is that a strong influx of EU workers contributes to economic efficiency. But the PM knows that the wider public worry is about the resulting pressure on public services and the trade-off between efficiency and social cohesion.

Cameron has to reassure both constituencies, and probably feels he mustn’t be blindsided by a Labour opposition belatedly alert to the electoral dangers ushered in by the Blairite administration’s laissez-faire approach towards the UK’s borders.

As the Romanians and Bulgarians arrive in the New Year it is a balancing act that Cameron will need skill to pull off.

Twitter: @martinflanagan8