Britain still has plenty of spare capacity in job market

Latest data showed that there is still plenty of spare capacity in British job market, said experts in London Wednesday. With rising employment as well as rapid workforce expansion, British unemployment rate stood at 7.2 percent in the three months to December 2013. It was lower than the 7.6 percent of the previous three-month period, but higher than the 7.1 percent in the three months to November, showed official data issued Wednesday. "Even if the jobless rate begins to fall again, it will still take a long time before all of the spare capacity in the labor market is used up," said Samuel Tombs, Britain Economist at Capital Economics. Tombs said unemployment is well above its equilibrium rate, which analysts think could be as low as 5 percent. The underemployment is still high, argued the London-based economic research company. "The part-time employees who would prefer full-time work only fell from 18.2 percent in the three months to November to 18.1 percent in the three months to December," said Tombs. Andrew Goodwin, senior economic adviser at economics think-tank EY ITEM Club, said the small uptick in unemployment is not a game-changer, with rising vacancies and employment growth suggesting there is still plenty of life in the labor market. "The improvement in the jobs situation continues to contrast sharply against the slow pace of wage growth, which underscores the continue need for a supportive monetary stance," Goodwin noted. On the same day, Bank of England's monthly meeting minute showed that all Monetary Policy Committee's (MPC) members were content to support the new form of forward guidance, which set out in the February's Inflation report. British central bank scrapped its 7-percent unemployment target and introduced 18 more indicators, including labor productivity and spare capacity, as reference in the policy making process on Feb. 12. With considerable slack still left in the labor market and all MPC members seemingly committed to the new form of guidance, Capital Economics continue to believe that interest rates are likely to remain on hold until late next year. EY ITEM Club also expects the central bank not to raise interest rates until the third quarter of 2015.