UK jobless claims drop more than expected but employment rate misses forecasts

UK jobless claims fell more than expected in October while employment gained between July and September, official figures revealed on Wednesday.

The number of people claiming jobseeker’s allowance last month dropped by 20,400 to 931,700. Analysts had predicted 21,300 less claims.

The unemployment rate held at 6% for the three months to September, surprising the market which had forecast a drop to 5.9%.

The UK added 112,000 jobs in the three months to September, compared to 46,000 in the previous quarter, leaving employment 694,000 persons higher than in the year ago period and at 30.79m.

In parallel, the number of unemployed decreased by 115,000 to reach 1.96m.

Average weekly earnings increased at an annual rate of 1% in the three months to September, up by three tenths of a percentage point 0.3%. That was better than the 0.8% rise expected by analysts.

Core earnings, excluding bonuses, grew by 1.3%, instead of by 1.1% as had been forecast.

Chancellor George Osborne, said: "Today’s figures are a strong sign that our long term economic plan is working. We’ve seen another big fall in unemployment, record numbers of jobs, and encouraging signs that pay cheques are beginning to rise faster than inflation. If we want to keep Britain on this path then we need to keep working through our economic plan."

Capital Economics said that the figures suggest that slack it being "used up quickly".

While the employment change and jobless rate missed expectations, the analyst said the fall in jobless claims suggests that the headline rate could see renewed falls in the coming months.

"But the most encouraging part of the latest data are signs that the reduction in labour market slack over the past year or so is finally starting to feed through to faster wage growth," it said.

The market will now turn its focus to the Bank of England's Monetary Policy Committee, which presents the latest Inflation Report at 10:30am. Digital Look will be following the report live.

"Although today’s labour market data indicated that the jobs recovery remains strong, we expect that the weakness of inflation and concerns about the impact on the UK of the faltering euro-zone recovery will mean that the report strikes a more dovish tone, bolstering expectations that the first rise in interest rates will not occur until well into 2015."