The Office for national Statistics reports that the employment rate over the period April to June 2013 for those aged between 16 and 64 ticked up by 0.1% from the previous three months to 71.5%. It was also 0.4% up on a year ago.
The unemployment rate remained unchanged at 7.8% but was down 0.2% on a year earlier.
The unemployment rate is a percentage over three months of the number of people who are unemployed ('have been looking for work in the last four weeks and if they are able to start work within the next two weeks') compared to the number of 'economically active people'. Economically active people are:
* those in work (doing one hour or more a week of paid work including unpaid family workers who benefit from it without earning a wage)
* the unemployed
The unemployment rate is therefore not a percentage of the entire working age population as it does not include the 8.99 million economically inactive people.
This unemployment rate figure has now become much more important to the economy as the Bank of England's Monetary Policy Committee has decided that the interest rate will remain at its historic low of 0.5% until the unemployment rate is below 7%.
But before raising rates when unemployment comes down to that threshold there are three other conditions, each of which has to be met that means that even if the unemployment rate fell below 7% there is no guarantee that rates would go up:
* the MPC must take the view that CPI inflation for the following 18-24 months will not reach or go above 2.5%.
* medium term inflation expectations remain 'sufficiently well anchored'.
* in the judgement of the Financial Policy Committee (FPC) the monetary policy does not pose a 'significant threat to financial stability that cannot be contained by the substantial range of mitigating policy actions available to the FPC, the Financial Conduct Authority and the Prudential Regulation Authority in a way consistent with their objectives'.
Richard Driver, Caxton FX Analyst, commented on the latest UK unemployment update and MPC minutes:
“The news out of the UK economy just gets better and better, the outlook is improving by the week and there is real momentum now. The fact that the eurozone economy is emerging from recession is also likely to give a lift to UK confidence.
"The UK labour market has been a reliable source of optimism this year and it is good to see another steady rise in wage growth, though it remains well below the rate of inflation so there is not much let up for UK households just yet. The unemployment rate remains unchanged at 7.8% but there remains some impressive underlying strength within the UK labour market.
"The fact that Martin Weale voted against Carney’s forward guidance on interest rates was a surprise given his usually dovish stance, as is the fact that the MPC has left more QE very much on the table as a policy option despite improving growth.”
Nida Ali, economic adviser to the EY ITEM Club, said:
Labour Market: “This is another encouraging set of figures for the labour market, as employment edged up and the unemployment rate flat-lined. The wider UK economy finally seems to be on a sustained path to recovery.
“There appears to be underlying momentum in the labour market, given the increase in full time workers and vacancies, as well as a another sharp drop in the claimant count. Unemployment is likely to have peaked and should continue drifting down in the coming months. Nevertheless, we don’t expect unemployment to be back below the MPC’s 7% threshold until late 2015.
“Earnings growth is still very weak but is at least beginning to move in the right direction. The sustained increase in employment should allow workers to bargain for better wages in the future. Plus, with inflation set to fall over the months ahead, the gap between the two should keep narrowing. This will ease the squeeze on household finances with the consumer sector likely to play a major role in the recovery.”
On the MPC minutes: “It was interesting that the vote on forward guidance was not unanimous, with Martin Weale deeming the time horizon of 18-24 months for the inflation knock out to be too long.
"Meanwhile, the unanimous vote against further QE for the time being was not surprising. Although some members continue to feel that more QE may be warranted, they are now in wait-and-see mode to gauge whether explicit forward guidance will be able to reduce interest rate expectations on its own.
“In our view, QE had already passed its sell by date and we believe that forward guidance will be beneficial for the UK. The economy is in recovery rather than remission and this guidance gives the Bank the flexibility to reduce the risk of relapse. It will help put a floor under firm’s expectations of output growth, as well as unemployment, and should therefore stimulate corporate spending. It should also help prevent the market derailing the recovery with a premature increase in market interest rates.”