Britain’s unemployment rate fell to 7.6 percent of the workforce in the three months to September, the lowest in over four years.
Nearly 42,000 fewer people claimed jobless benefits in October.
But even as the UK labour market picks up, many people in work are not seeing an improvement in their living standards and a study by the Institute for Public Policy Research said young Britons are experiencing a “jobless recovery”.
At the same time the Bank of England said unemployment will fall much faster than it had previously predicted, but stressed that it is in no hurry to raise interest rates.
The BoE has made unemployment the lynchpin of its plan to keep the cost of borrowing at a record low and has said it will not raise them until the jobless rate falls at least to seven percent.
In August, it said that would probably not happen for another three years but in a set of new, upbeat forecasts on Wednesday, the central bank said unemployment could hit seven percent late next year if interest rates stay unchanged.
BoE Governor Mark Carney said on Wednesday that a fall in unemployment would not be an automatic trigger for an increase in interest rates.
Carney sounded his most upbeat about the British economy since he took over the central bank in July.
“For the first time in a long time you don’t have to be an optimist to see the glass is half full. The recovery has finally taken hold,” he told a news conference after the bank published its quarterly inflation report.
The pound jumped in value against other currencies and British government bond prices fell to their lowest level in four weeks as investors adjusted to the Bank’s new, shorter timeframe for when unemployment might fall.
If interest rates rise as the market expects, growth will be weaker and unemployment will prove slower to fall, the BoE predicted, saying that in this case its mean forecast was for unemployment to stay above seven percent until the end of 2016.
Based on market interest rate expectations, the BoE expects inflation to fall below its 2 percent target at the start of 2015 – six months earlier than it had expected in August.
The Bank also revised up its growth forecasts for this year and next. It sees 0.9 percent growth in the last three months of 2013, taking full year growth up to 1.6 percent compared to 1.4 percent forecast in August. For 2014 it expects annual growth of 2.8 percent, compared to 2.5 percent predicted in August.