Britain's unemployment drops to 5-year low of 6.9%

City workers head to work during the morning rush hour in Southwark in central London, on April 16, 2014. Britain's unemployment rate dropped to a five-year low point of 6.9 per cent in the quarter to February, as the country's economic recovery
City workers head to work during the morning rush hour in Southwark in central London, on April 16, 2014. Britain's unemployment rate dropped to a five-year low point of 6.9 per cent in the quarter to February, as the country's economic recovery picks up speed before next year's general election. -- PHOTO: REUTERS

LONDON (AFP) - Britain's unemployment rate dropped to a five-year low point of 6.9 per cent in the quarter to February, as the country's economic recovery picks up speed before next year's general election.

The rate dropped from 7.2 per cent in the quarter to January, the Office for National Statistics (ONS) said in a statement, while the fall was bigger than expected with analysts forecasting a drop to 7.1 per cent.

"Latest estimates for December 2013 to February 2014 show that employment continued to increase, unemployment continued to fall, as did the number of economically inactive people aged from 16 to 64," the ONS said.

"These changes continue the general direction of movement over the past two years," it added.

British finance minister George Osborne hailed Wednesday's data as "very good news".

"Coming alongside yesterday's lower inflation, they are compelling evidence that our economic plan is working," the chancellor of the exchequer said in a statement.

The coalition government led by Prime Minister David Cameron has overseen a rapid improvement to Britain's economic fortunes in one year since the International Monetary Fund had warned that his austerity policies were "playing with fire".

Britain goes to the polls in May 2015, with the main opposition Labour party hoping to return to power after it had it snatched away by the Conservative-Liberal Democrat coalition formed four years ago following the financial crisis.

The jobless rate is meanwhile no longer linked to the Bank of England's pledge to keep its key interest rate at a record low level, after governor Mark Carney recently unveiled new forward guidance. The central bank had previously pledged not to consider a rate rise until unemployment fell to at least 7.0 per cent.

However, the BOE tweaked its forward guidance policy after the rate fell faster than expected in recent months. Under the amended guidance, the bank will seek to absorb all the spare capacity in the economy as it looks to keep inflation close to a government-set target of 2.0 per cent, before moving to hike its key lending rate from 0.50 per cent.