The UK labour market statistics released today show that the labour market continued to improve. The unemployment rate (3M (NYSE:MMM)) declined from 5.7% in January to 5.6% in February (Danske Bank: 5.7%, consensus: 5.6%). In our view, this is a strong report that supports our call for a BoE hike in November 2015, see also Research UK: We have moved the first BoE hike to November 2015 , 15 April.
The unemployment rate is now very close to the Bank of England (BoE)'s estimated medium-term equilibrium unemployment rate at 5.5%. This is more or less in line with the projections from the latest Inflation Report, which suggested that this could happen in Q2 15. In other words, the unemployment rate is close to normal and the slack in the labour market is diminishing, which is important for the timing of the first BoE hike. Hence the fall in the unemployment rate supports our view of a BoE hike later this year.
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