Unemployment Rate Drops To 7.4%

[rollover]

No, it means they will have to find another reason to keep rates nailed to the floor.

More Romanian and Bulgarian immigrants would be welcome - push up unemployment, interest rate to stay low, boost rental and keep high house prices. It will be a win-win for everyone.

[FedupTeddiBear]

No, it means they will have to find another reason to keep rates nailed to the floor.

No they won't - unemployment can simply be "calculated" to be above 7% for as long as is necessary.

[winkie]

Which exposes the weaknesses in the policy of forward guidance ?

How can they guide the future.....they are hardly fortune tellers......they can only guide how they would like you to act.

[silver surfer]

Does that mean that higher interest rates are more likely?

Yes it does. But you need to keep it in context.

Mark Carney said he would consider raising the bank rate when unemployment dropped to 7%. He didn't say he would raise the bank rate. In addition, yesterday's news that inflation fell means higher interest rates are actually less likely.

On balance I doubt there will be any increase in the base rate until after the general election in 2015, and even then I'm not expecting much, maybe an increase from 0.5% to about 1.0% or 1.25% over the following two or three years.

[wonderpup]

Well, we have wage deflation in the west since about 2000 - what do you expect?

That's the reason the government push debt and rising houses price, to try and mask what is going on rather than attempt to tackle the root problem of wage deflation.

Then again, I believe the only way to tackle the problem is by letting deflation rip - lower asset prices primarily. the problem is that the main voting block won't like this much.

Pushing up asset prices and debt against a backdrop of falling real wages is really asking for trouble, but as long as the trouble doesn't happen on my watch or I am alright jack it doesn't matter.

They [bankers & politicians] almost lost control of the ship in 2008 and those props are still in place. Building the debt bubble on top of it is suicidal, but that is the path they have chosen.

It's a little ironic that a generation of economists and politicians who have advocated a globalist agenda for years are now suddenly in need of wage inflation to keep the show on the road- did it not occur to these people that global wage arbitrage involving vast numbers of new cheap workers might impact on western wage levels?

[renting til I die]

They already have it's called 'sustained growth' but they have decided (after the mistake of setting the 7% figure) not to define what is 'sustained' or what the level of 'growth' should be.

Oh yes, I forget about Carney's speech about that!

[renting til I die]

No they won't - unemployment can simply be "calculated" to be above 7% for as long as is necessary.

Yes, that thought had occurred to me too!

[crashmonitor]

I was rather surprised to learn that these unemployment figures are produced using a three month moving average. If you discount this, then we were actually already at 7.0% on a single month basis in October (according to the Telegraph today) and are probably at something like 6.8% by now.

I do not understand the concept of a moving average when applied to things like house prices, GDP and unemployment. these things tend to move up and down in a straight line they do not go up one month and down the next, they follow trends.

Hence you get the crazy stat that the UK economy will have only grown 1.6% in 2013 when referring to four quarter which will have grown 0.5%, 0.7%, 0.8% and 1.3%?...3.3% growth, halved when applying a 12 month moving average because the previous year was flat.

All this must be very convenient for the MPC using smoothed figures that have no relation to where we are at.

I just hope they consider interest rates on the basis of where we are actually at and not be blinded by historic smoothing........annual GDP data for 2013 is effected by growth in January 2012 and these unemployment figures by what the level was in August 2013.

Edited December 19, 2013 by crashmonitor

[FreeTrader]

I was rather surprised to learn that these unemployment figures are produced using a three month moving average. If you discount this, then we were actually already at 7.0% on a single month basis in October (according to the Telegraph today) and are probably at something like 6.8% by now.

I do not understand the concept of a moving average when applied to things like house prices, GDP and unemployment. these things tend to move up and down in a straight line they do not go up one month and down the next, they follow trends.

Hence you get the crazy stat that the UK economy will have only grown 1.6% in 2013 when referring to four quarter which will have grown 0.5%, 0.7%, 0.8% and 1.3%?...3.3% growth, halved when applying a 12 month moving average because the previous year was flat.

All this must be very convenient for the MPC using smoothed figures that have no relation to where we are at.

I just hope they consider interest rates on the basis of where we are actually at and not be blinded by historic smoothing........annual GDP data for 2013 is effected by growth in January 2012 and these unemployment figures by what the level was in August 2013.

To be fair, the primary reason ONS uses a three month rolling average for the unemployment rate is because the single month dataset is too noisy, as the chart below shows:

(Chart by Simon Ward)

[crashmonitor]

To be fair, the primary reason ONS uses a three month rolling average for the unemployment rate is because the single month dataset is too noisy, as the chart below shows:

(Chart by Simon Ward)

Even so I would have thought you need less lagging data than this when it come to interest rate decisions. We are almost certainly below 7% now and I hope the MPC will take that into account.