Unemployment in the United Kingdom reaches new four-decade low

Unemployment in the United Kingdom reaches new four-decade low

Economists said the weaker-than-expected headline pay figure was unlikely to knock the Bank of England off course from raising interest rates next month for only the second time since the global financial crisis. British households - whose spending is the main driver of the country's economy - have been hit by the double whammy of slow wage growth and a jump in inflation, due mostly to the fall in the value of the pound after the 2016 Brexit vote. Sterling weakened as the data showed wages in the three months to February rose by 2.8 percent, unchanged from the growth rate in the three months to January and below a median forecast of 3.0 percent in a Reuters poll of economists.

Unemployment fell from 4.3 per cent in January to only 4.2 per cent in the three months to February, according to data published today by the Office for National Statistics, the lowest level since 1975. The figure missed economists' estimates for average pay growth to reach 3%. The employment rate, which measures the number of people aged from 16 to 64 years who were in work, rose to 75.4%, which was the highest level since comparable records began in 1971.

The Pound-to-Dollar rate traded at its highest level since the Brexit referendum earlier on Tuesday while the Pound-to-Euro rate was closing in on the 1.16 level, which would have put the exchange rate close to a one year high.

That probability is evident in the performance of the pound which has rallied this year, particularly in the past few trading sessions.

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Halpenny suggests Sterling's rise against the Euro is an indication that the currency is now appreciating based on its own merits, rather than the weakness of other currencies.

After all, much of the Pound's 10% gain over the Dollar in 2017 came as a result of a weak United States currency rather than a strong Sterling.

Rate setters predicted at the time that inflation would remain above the 2% target until at least the first quarter of 2021 and that it would average around 2.9% for the first quarter of 2018.

Forecaster are split on whether or not the Bank of England will raise rates from 0.5% to 0.75% in May, but the latest positive economic data seems to make that increase more likely. The bank is tasked with setting policy to achieve an inflation rate of around 2 percent and updated figures due Wednesday are not expected to show much change in the annual rate in March.

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