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UK unemployment falls to 7.6 percent

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UK unemployment falls to 7.6 percent

UK unemployment edged one notch closer to the Bank of England’s target rate of 7 percent, the level at which policymakers could begin raising interest rates. The unemployment rate fell to 7.6 percent in the three months to September, the lowest since 2009, according to the Office for National Statistics.

In total, 41,700 fewer Britons were unemployed in October, according to the official claimant count change. The figure beat economists’ estimates, which called for a drop of up to 35,000. The employment rate for workers aged 16 to 64 rose 0.3 percentage points to 71.8 percent in the three months to September. Payrolls increased by 177,000 between July and September, the report concluded.

The Bank of England revised its growth forecast and acknowledged improvements in the labour market, shifting its rate guidance to account for falling unemployment. The central bank made unemployment the lynchpin of monetary policy, tying interest rates to the unemployment rate. BOE Governor Mark Carney said the unemployment rate could reach its target of 7 percent in the third quarter of 2015, almost a full year ahead of prior forecasts. Carney made it clear the revised outlook shouldn’t be taken as an automatic rate-hike trigger. “With the recovery taking hold, our task now is to secure it,” Carney said in a press conference.

“Unemployment is currently coming down pretty rapidly in reaction to the economy’s markedly improved performance in recent months,” said Howard Archer of London’s IHS Global Insight. Archer and other market participants have seen the UK economy accelerate over the past several months, with service and construction activity hitting multi-year highs in October.

The BOE expects the economy to grow 1.6 percent this year and 2.8 percent in 2014, compared to previous estimates of 1.4 percent and 2.5 percent, respectively.

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