Pound glows as UK jobless rate at lowest since 2008

UK jobless rate lowest since 2008
UK jobless rate lowest since 2008   

The British pound jumped to a one-month high against the dollar on Friday, after official data showed the U.K.'s unemployment rate fell in February to its lowest level since July 2008.

The number of people in work in the U.K. rose by 248,000 in the three months to February, its biggest amount in almost a year, to a record 31.049 million, the Office for National Statistics said.

As a result, the jobless rate fell to 5.6 percent, from 5.7 percent in January, in line with analysts' expectations.

"The recovery is being driven by full-time work in the private sector, far outstripping public sector job losses," Ian Stewart, chief economist at Deloitte, said in a note.

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"Despite these buoyant job numbers, earnings growth has drifted up only slowly from last year's lows. But with skills shortages emerging, and the jobless rate set to fall further, we see earnings growth accelerating through this year and next."

Total average earnings in the three months to February rose 1.7 percent compared with the same period a year earlier, and down from 1.9 percent in January.

Bouncing back

The closely-watched jobs data, which comes just three weeks ahead of a tight general election on May 7, lifted sterling to a one-month high above $1.50.

Sterling, which has been hurt by uncertainty ahead of the election, has added 2.7 percent in the past week. This puts the currency on track for its best performance since October 2009, according to Reuters data.

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"Cable (pound/dollar) has been under relentless pressure over the past month on political rather than economic concerns as fears have risen that the Tories may lose their grip on power allowing a much less market friendly Labor government to take over," said Boris Schlossberg, managing director of currency strategy at BK Asset Management, in a note. Britain's ruling Conservative Party is also referred to as the Tory party, or Tories.

"However the latest labor data should provide a small boost to the Tories as it shows that the recovery remains on track. If the polling data confirms that thesis, cable could see stronger gains ahead," Schlossberg added.

Election focus

Analysts said the strong jobs data added to a generally upbeat outlook for the U.K. economy.

The unemployment rate has fallen to 5.6 percent from 7.9 percent at the time of the last election in 2010. It compares with a jobless rate of 5.5 percent in the U.S. and 11.3 percent in the euro zone.

"The final jobs and earnings data before May's general election provide a double dose of good news for the Conservatives and (coalition partner) Liberal Democrats," said Howard Archer, the chief European and U.K. economist at IHS, in a note.

He said he expected the unemployment rate to fall to 5.2 percent by the end of 2015, adding that uncertainty ahead of the election could lead to some caution in hiring.

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"It is also possible that increased business uncertainty ahead of, and possibly just after, May's general election could result in greater caution in hiring workers in the near term," Archer said.

Most opinion polls show the Conservatives and opposition Labour Party neck and neck, raising the prospect of a hung parliament.

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