What does mixed jobs report say about UK recovery?

Otmane El Rhazi from Macro feed.

As the UK unemployment rate hits its lowest level since February 2009, the broader picture remains mixed. The March unemployment rate did tick down to 6.8 percent but earnings failed to rise as much as expected; they were up 1.7 percent versus the 2.1 percent expected.

Alpesh Paleja, Head of Economic Analysis at the Confederation of British Industry (CBI) – Britain’s top business lobby – warns that the lack of recovery in productivity will act as a “drag” on job creations, and expects more jobs to be created over the next two years, but at a “slower pace”.

The figures – released by the Office for National Statistics (ONS) – showed a record 283,000 secured a job in the three months to March, with self-employment driving the performance. This means that more than 30.4 million people are now in work.

The figure is closely watched by the Bank of England for evidence of people able to absorb rising mortgage costs when it begins to raise bank rates. The BoE’s original version of its forward guidance policy said it would not think about raising rates until Britain’s jobless rate fell to 7 percent. A plan that was eventually brushed under the carpet when unemployment fell faster than expected .

Overall, the CBI remains positive when it comes to the outlook for Britain and has even raised its economic forecast for this year. It now thinks Britain’s economy will grow 3.0 percent this year, up from its previous forecast of 2.6 percent. It also expects business investment growth of 8.3 percent this year and 9.1 percent next year.

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