Strong unemployment figures but weak wage growth reinforces case for low interest rates

18th July 2014

·In the three months to May 2014, the unemployment rate fell to 6.

5%, the lowest since Q4 2008 ·Unemployment fell by 121,000 compared with the previous three months, while employment increased by 254,000 ·Youth unemployment was 17.8%, down from 19.1% in the previous three months ·The rise in pay including bonuses fell to 0.3%, while the rise in pay excluding bonuses fell to 0.7% Commenting on the labour market statistics for July 2014, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: -These impressive employment figures highlight the resilience and flexibility of the UK labour market. Unemployment is now at its lowest rate since before the recession, which shows that the recovery really is gaining momentum. While it is pleasing to see a significant fall in youth unemployment, more still needs to do done to help equip young people with the skills they need to succeed in work or start up a business. -The case for not raising interest rates prematurely is strengthened further by weakening wage growth and despite the increase in inflation recorded yesterday, it still remains below the Bank of England's two percent target. The MPC must boost business confidence by explaining that higher rates will only be considered when economic circumstances justify such a move.

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