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Round-up of the week

Posted on 18th December 2015

Employment hits record high

The total number of people in work in the UK now stands at 31.3 million, official figures have revealed.

According to the Office for National Statistics (ONS), this means the UK employment rate is now at 73.9 per cent - the highest level on record.

The figures also represent an increase of more than half a million in the number of people in work compared to a year earlier. This has coincided with a 2.4 per cent increase in wages over the same period.

Priti Patel, the employment minister, has hailed the ONS data, saying that the year is ending on a high.

"Today’s figures show half a million more people in work compared to this time last year, which means hundreds of thousands of families are going into the festive season with the security and hope for the future that work brings," she commented.

Ms Patel said the government intends to "build on this positive story" in 2016 and deliver a "high-wage, low-welfare society with opportunity and security at its heart that we know the British people want".

The British Chambers of Commerce (BCC) has also welcomed the figures, with chief economist David Kern saying the figures are "encouraging".

"Overall these figures demonstrate that our flexible and vibrant labour market remains a source of strength for the UK economy," he stated.

“While wages are continuing to rise faster than prices, boosting disposable incomes, the slowdown in annual earnings growth will provide more evidence to the MPC that there is no need to consider any early increase in interest rates.”

US Fed raises interest rates

The US Federal Reserve this week raised interest rates by 0.25 per cent in a move that had been largely anticipated by analysts.

However, the business community in the UK has stressed that it is still too early to increase the cost of borrowing at home.

Rain Newton-Smith, director of economics at the CBI, stated that while the UK has been one of the best performing advanced economies in the last few years, the Bank of England "probably still has a way to go before rising inflationary pressures at home persuade it to follow and up interest rates".

She said the move by the Fed reflects the health of the US jobs market, while the strengthening of household incomes in America is "good news for British firms selling into the US market".

The BCC added that the Bank of England should wait and see what impact the US rate rise has before considering adopting a similar step in the UK. 

Director-general John Longworth said: "There is still a risk of a global slowdown in an indebted world, especially if the Fed raises rates too quickly."

He believes interest rates in the UK will not go up until Q3 2016 at the earliest, but stressed they will have to be increased at some point.

"While conditions don’t yet demand an increase here, persistently low rates add to the debt problem in an already unbalanced economy," Mr Longworth said. "The longer we wait the greater potential for impact when it comes.”

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