Business world given reason for cheer as unemployment continues to fall

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Today, the Office for National Statistics released their latest set of figures for the state of the UK labour market. The stats revealed that, chiefly, unemployment fell in the three months until the end of February by 77.000, with the year-on-year figure being 320,000 lower, equivalent to a full percentage point. Any fall in unemployment is welcomed, but what consequences could a rise have?

High unemployment is likely to have a big impact on consumer spending, while demand for high-end goods and services is likely to fall if fewer people have the means to pay for it. This is why the latest unemployment figures coming out of the UK are likely to be greeted by a huge number of businesses, especially as this has been the prevailing trend for close to two years now.

SMEs feeling the benefit?

Understandably, as unemployment has fallen, the number of people now in work has risen. 239,000 more people have moved into employment than between September and November 2013. Year-on-year, this figure rose by 691,000, showing that the labour market is well and truly on the rebound, although some parts of the market are playing catch-up, namely wage growth.

One factor in undermining economic growth has been wages failing to keep pace with inflation, harming small businesses looking to sell their products to as wide a customer base as possible. Nevertheless, as Joshua Raymond, Chief Market Strategist at cityindex.co.uk explained, this is changing for the better as well.

“The UK unemployment rate fell more than expected to 6.9%, its lowest level since February 2009. At the same time, UK earnings grew with three month average earnings hitting 1.7% and rising above inflation (1.6%) for the first time in four years. All in all, this is another pleasing example of improvement in the UK labour market”, he said.

“The fact we now have three-month average earnings rising faster than inflation is an important milestone in the UK recovery. Pressure on consumer spending has been one of the weakest parts of the UK economy in recent years and the ability of the consumer to now earn more than prices are rising gives them greater power and potentially adds another string to the UK recovery”, he added.

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Published on: 16th April 2014