By Catherine Reynolds
Investing.com -- The U.K. labor market continued to improve in October after the end of the government's furlough scheme, smoothing the way for the Bank of England to raise interest rates if it wants to.
Employment rose by 149,000 in the three months through October, relative to the previous three months, according to figures released by the Office for National Statistics (ONS) on Tuesday. That was less than the 228,000 expected. The number of those claiming jobless benefits fell by 49,800 in November alone, after a smaller decline of 14,900 in October.
The U.K. employment rate was up 0.2% on the previous quarter and just 1.1% shy of its rate before the Covid pandemic hit. Unemployment was estimated by the ONS at 4.2% of the workforce for the period, 0.4% lower than the previous quarter’s figures. Total hours worked in the economy were also up but remain below pre-coronavirus levels.
U.K. employment figures have improved in tandem with the easing of Covid restrictions. But fears are rising that Boris Johnson’s government will reimpose steadily harsher restrictions to deal with the fresh wave of Covid-19 infections and potentially stall the economic recovery.
Rising inflation had led to speculation that the Bank of England would raise interest rates imminently.
“My instinct is still that the Bank of England will raise interest rates in early ’22,” said Chris Bailey, an analyst with Financial Orbit via Twitter (NYSE:TWTR). “They should do it this week but undoubtedly will choose not to,” he added.
Paul Donovan, chief economist at UBS Global Wealth Management, said the figures showed little evidence of an impact from the ending of furlough in the U.K. and also suggested that the hit to U.K. labor supply from European workers who returned home during Covid was perhaps milder than first feared.
He noted that the number of jobs in the U.K. economy is now above its pre-pandemic level.
“Some of the increase to above pre-pandemic levels could be workers taking on additional employment,” Donovan said, adding: “That is supported by research that suggests that the growth in jobs recently has been particularly a growth in part-time jobs.”
(CORRECTION: An earlier version of this story incorrectly stated the month for the claimant count.)