The document discusses the UK's unemployment rate and the Bank of England's policy of "Forward Guidance". It notes that the UK unemployment rate remained at 7.8% in July 2013. The Bank of England has said that interest rates will remain low until unemployment falls to 7% by 2016. Forward Guidance aims to guide borrowers' expectations around future interest rates to reduce long-term rates. The document also outlines some negative economic impacts of high unemployment, such as reduced tax revenue and spending that can slow GDP growth.

1. Carney Jobless
Task Laid Bare as
Rate Seen at
7.8%: U.K. Credit
By Jennifer Ryan - Sep
10, 2013 4:22 PM
(Bloomberg.com)

2. Does anyone remember the
video that sir showed us?
It was about how certain countries got into a
recession stage in their economy. One of them was
UK.

3. The recession originated in America where mortgage companies
got into massive debt by giving out many subprime mortgages.
They then bundled this debt on to other countries such as the UK
by borrowing from abroad to finance this risky lending.
As UK banks began to struggle, the government allowed them to
lend to each other to promote liquidity. Unfortunately, this resulted
in more debt and tension between the banks. The negative
publicity that Northern Rock brought caused panic to set in, as
consumers worried the banks would not be able to pay up.
Consumer confidence was knocked greatly. Along with the
overvalued housing market finally failing, consumption began to
fall.
Once Northern Rock was bailed out, some banks thought they
were too big to collapse and continued lending for subprime
mortgages, which obviously worsened the situation.

4. UK Today (2013)
 Governor Mark Carney’s argument that
interest rates must remain at a record low for
three more years to help the economy
recover.
 The jobless rate based on International Labour
Organization (ILO) standards stayed at 7.8% in
the three months through July, according to
the median estimate of 28 economists in a
Bloomberg News survey. The rate has not
been below 7.7% since 2009.

5. UK’s goal; to cut
unemployment to 7% by 2016

6. The Bank of England has now embarked on a course
of ‘Forward Guidance’.
This is an attempt to lay out the future course of
current monetary policy over a longer period of time.
The new Governor of the BoE, Mark Carney, has said
that Bank Rate will remain unchanged until
unemployment falls to 7% from its current 7.8% level
(June 2013).The Bank says this will occur in 2016.
In contrast to developments in the United States, UK
unemployment has been slow to fall.

7. Forward Guidance
 It is making a promise about the
future, particularly about future interest
rates. The Bank of England, like other
central banks, directly controls the short-
term interest rate at which it lends to or
borrows from the High Street banks
overnight.
 Borrowers can estimate for how long such
low interest rates may be around for in
terms of months or years.
 Forward guidance is thus a way of
converting low short-term interest rates
into lower long-term interest rates.

8. Guidance Forecast
 Carney, who will address U.K. lawmakers
on Sept. 12, introduced forward guidance
last month and said the economy needs
to create more than three quarters of a
million jobs for unemployment to reach
7%.
 In addition, a further 400,000 government
positions are set to be eliminated over the
next three years based on Office for
Budget Responsibility estimates, meaning
the private sector would need to create
more than 1 million jobs for the jobless rate
to fall to 7 percent.

9. Unemployment’s Effect in
an economy
These are some of the reasons why the UK
government is concerned with it

10.  Unemployment rate of a country is a very common
measure for determining the health of an economy.
 If there are fewer people with jobs, then they have less
disposable income to spend on investments.
 With one person losing his job, there is one less person
that will pay state and federal income taxes, one less
person that will pay additional sales tax revenue as a
laid off worker will instantly cut back on their non-
necessary spending due to less disposable income
and worry about future financial security.
 Many countries are facing a big debt crisis that
requires higher tax revenues to prevent a default. If
the country’s government is not financially
stable, then the banks and the whole financial system
will experience a decrease in confidence translating
to a downturn in the value of the stock market.

11.  Every unemployed citizen in the UK will
become eligible for unemployment
insurance and will start slowly sucking
money from the economy rather than
contributing to it in the form of taxes, thus
increasing deficits. Example: Jobseeker's
Allowance
 Loss in income becomes a ripple
effect, and less money will be spent in the
economy, leading to more people losing
their jobs and it starts to become a vicious
cycle.

12. Jobseeker's Allowance (UK)
 Single
 £71.00 per week for a person aged over 25
 £56.25 per week for a person aged 18–24.

13. End of our
Macro Report
Mercado, Camille Mariah
Pineda, Leigh-Ann Trisha S.