UK unemployment expected to fall as nascent recovery feeds through to jobs

Economists expect claimant count to fall by 8,000, while Bank of England minutes will shed light on MPC's decision making

The number of people out of work and claiming benefits in the UK is expected to have fallen again last month as the economy's nascent recovery feeds through into the jobs market.

Official labour market data due at 9.30am on Wednesday will show an 8,000 fall in the claimant count in June, according to a Reuters poll of economists, while the unemployment rate for May is expected to remain at 7.8%.

Expectations for an improvement, at least on some measures of the labour market, follow a range of surveys suggesting companies are tentatively hiring new staff as the economy show signs of recovery.

Howard Archer, economist at IHS Global Insight, said: "The latest employment and unemployment data show improvement after the jobs market faltered early on in 2013. We expect further labour-market improvement to be evident in the figures out on Wednesday, supported by recently healthier economic activity.

"We now expect unemployment to be broadly stable over the next few months, before starting to edge lower from the end of 2013."

He predicted employment in the private sector would gradually pick up but that would be offset by an expanding labour force and further job losses in the public sector.

The UK unemployment rate is expected to stay at 7.8%. PhotographThe thinktank Capital Economics is less optimistic than the consensus on the drop in claimant count, expecting a fall of 5,000 in June after a fall of 8,600 in May. It is also cautious about earnings growth, forecasting an annual pace of 1.5%, just above the median forecast for 1.4%.

"With unemployment still high and productivity growth weak, underlying wage growth probably remained subdued," it said in a preview of the data.

That wage growth contrasts with a retail price rate of inflation of 3.3%, according to official data on Tuesday, meaning real wages continue to fall. The TUC says workers have now suffered falling real wages for more than 40 months – the longest lasting squeeze since 1875-1878.

Separately at 9.30am on Wednesday, the Bank of England releases the minutes from new governor Mark Carney's first monetary policy meeting, when rates were held at 0.5% and there was no change to quantitative easing (QE). The minutes will sum up the discussion and show how the nine committee members voted.

On the whole, economists expect the vote against more QE in July to have been seven members to two, compared with 6-3 at King's final meeting in June when he joined Paul Fisher and David Miles in calling for £25bn more in asset purchases.

Although Carney's first policy meeting ended as expected with interest rates pegged at their record low and no further QE on top of the £375bn so far, he still surprised markets with a statement alongside the decision.

The MPC used the release to say that there was no need for the recent sharp increase in yields on government bonds, which would indicate that interest rates were due to rise. It was only the sixth time in its 16-year history that the MPC had issued a statement alongside a decision to leave policy unchanged.

Article Source : http://www.guardian.co.uk
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