UK employment falls for second month, pay edges up
The number of people in work in Britain fell again, suggesting employers are turning more cautious as Brexit nears, and while pay growth quickened slightly, it remained lower than inflation, official data showed on Wednesday.
Unlike other countries in Europe, Britain’s economy has slowed sharply this year as the 2016 referendum decision to leave the European Union weighed on households and companies.
But job creation had largely remained strong, until recently.
The number of people in work fell by 56,000 during the three months to October, the most since mid-2015, the Office for National Statistics (ONS) said. It was the second consecutive fall, driven entirely by young workers.
A separate measure of the balance between the number of people in work, those classed as unemployed and people neither working nor seeking a job showed a net 44,000 people leaving employment in the earlier July to September period.
That was the biggest outflow since the three months to September 2011, the ONS said.
Sterling fell from a day’s high against the U.S. dollar despite the pick-up in pay growth which the Bank of England is monitoring as it decides when to raise interest rates again.
The failure of pay to pick up quickly as unemployment falls fast has puzzled central banks in advanced economies around the world. The problem in Britain is more acute, given the spike in inflation since the Brexit vote caused the pound to lose value.
Average weekly earnings, excluding bonuses, rose by an annual 2.3 percent in the three months to October, compared with 2.2 percent in the three months to September. Analysts in a Reuters poll had expected to see no improvement.
Including bonuses, wage growth picked up to 2.5 percent from 2.3 percent, as expected in the Reuters poll. That was the strongest increase since the end of 2016 although the comparison was flattered by weak bonus payments last year.
Peter Dixon, an economist with Commerzbank, said growth in wages would probably continue to gain speed gradually, but the weakness in the employment figures hinted at trouble ahead.
“I wonder whether the numbers might be telling us that the labour market is beginning to weaken. We will have to keep an eye on that going forward,” Dixon said.
The unemployment rate held unexpectedly at its four-decade low of 4.3 percent, against expectations for a further decrease to 4.2 percent in a Reuters poll of economists.
The Bank of England increased interest rates for the first time since 2007 last month as most of its policymakers thought the steep fall in unemployment will soon start to push up wages.
The BoE’s next rate decision announcement is due on Thursday when it is widely expected to keep borrowing costs on hold.
Despite October’s improvement, pay growth is still lagging inflation which hit a nearly six-year high of 3.1 percent in November.
The ONS said the number of unemployment benefit claimants rose by 5,900 to 817,500 in November while the number of vacancies hit a new record high of 798,000.
Economists taking part in the Reuters poll had expected the number of benefit claimants - which is considered to be a potential early warning sign of an economic downturn - to rise by 3,200.