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Call for cut in interest rates

By TJ (18-10-2007)
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Learning and Development News - Call for cut in interest rates

The latest Office for National Statistics (ONS) labour market figures show a rise in the number of people in work in the three months to the end of August, more job vacancies, a further fall in unemployment and slightly higher than expected growth in average earnings. But, says Dr John Philpott, Chief Economist at the Chartered Institute of Personnel and Development (CIPD); the UK jobs market is far from overheating, set to cool and will need the boost of a cut in interest rates to prevent higher unemployment in 2008.

The report reveals:

  • although there was a rise in total employment, numbers of part-times and temporary employees fell by 35,000 and 48,000 respectively
  • those of state pension age and above took 8 out of 10 new jobs, although most of these additional working pensions will be self-employed
  • the number of 16 and 17 year olds who are jobless and seeking work rose by 20,000 to 200,000 in the last quarter.

The rise in unemployment for 16 and 17 year olds may be because many school-leavers lack the skills and employability sought by employers who now have access to a ready supply of willing and able migrant labour.  Dr Philpott warns now that employers have to pay 16 and 17 year olds a minimum wage, their situation may become even worse.

Calling for an interest rate cut in order to stem a rise in unemployment next year Dr Philpott said:

"Some will say that these latest ONS Figures on jobs and pay reduce the chances of an early cut in interest rates. Yet with the jobs market far from overheating, the outlook for retail price inflation benign ahead of the winter pay bargaining season, and an economic slowdown waiting in the wings; there is a strong case for a cut in interest rates as early as next month.

The CIPD's expectation is that, at the current Bank's interest rate, there will be a standstill in overall employment growth by the middle of 2008, with a strong possibility of a fall in the number of people in work. Either way, unemployment is likely to rise. The jobless need the Monetary Policy Committee to start cutting interest rates now."


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