This past Wednesday, The Office of National Statistics said that the UK's unemployment rate fell to 7.1% in the three months ended November 30. The drop was .5% and was bigger than analysts had predicted. The government has claimed the drop as evidence that its long-term economic plans are working.
This drop in the unemployment rate could lead to the Bank of England reassessing its monetary policy as Mark Carney, the Bank of England's Governor, has said. While the current interest rate is set at a record low .5%, Carney did stress that there was no immediate need to raise rates, as wage and productivity growth have been weak. Andrew Goodwin, senior economic adviser to the EY ITEM Club also weighed in on the issue of raising interest rates. “As the minutes make clear, there is no prospect of a rate rise in the near future.” He said. “Raising interest rates too soon, before real wages have begun to improve and growth has broadened out, could risk choking off the fragile consumer led recovery.”
While the raise in interest rates is inevitable, it is vital that they are raised gradually and at a time that will not damage the recovering economy. Most economists agree that the rise should not occur until real wage growth has begun.
http://www.washingtonpost.com/business/uk-unemployment-rate-drops/2014/01/22/49492468-834b-11e3-a273-6ffd9cf9f4ba_story.html
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