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UK Jobless Rate at 42-Year Low

UK Jobless Rate at 42-Year LowUK Jobless Rate at 42-Year Low

Britain’s unemployment held at a 42-year low in the three months through August and the number of people in work approached a record high, according to figures published Wednesday.

The latest snapshot of the labor market from the Office for National Statistics may help to explain why the Bank of England appears to be edging toward its first interest-rate increase for a decade, Bloomberg reported.

Wage growth was little changed at just over 2%—well behind the rate of inflation—but officials are signaling they are no longer prepared to wait for a pickup before tightening policy.

In evidence to lawmakers on Tuesday, BoE Governor Mark Carney made clear that the erosion of slack in the economy is the primary concern as policy makers prepare for their November 2 meeting.

The jobless rate stood at 4.3% in the latest period, staying below the 4.5% rate regarded by the BoE as the “equilibrium rate”. The number of people looking for work fell 52,000 to 1.44 million.

“Many labor market measures continue to strengthen. Employment growth in the latest three-month period was driven mainly by women, with a corresponding drop in inactivity. Vacancies remain robust, at a near-record level,” Matt Hughes, a senior statistician at the Office for National Statistics said.

He also said that average weekly earnings including bonuses increased by 2.2% in the three months to August from the same period a year ago. Excluding bonuses, average earnings were 2.1% higher.

Whichever measure is used, earnings continue to lag inflation. Inflation stood at 2.9% in August and rose to 3% in September, its highest level since 2012.

Employment rose 94,000 to 32.1 million. At 75.1%, the employment rate is just below the record 75.3% recorded in May to July.

The pound briefly jumped after the data before erasing its gains. It was at $1.3178 as of 9:39 am London time, down 0.1% on the day.

With the labor market tight and Brexit curbing immigration, boosting growth without generating inflation may require a significant improvement in productivity, something considered unlikely given the dismal performance of recent years and the effect Brexit is having on investment.

The pressure on living standards continued in the latest three months, with regular pay growth falling in real term for a sixth month. For some, that may be a reason to hold off raising rates.

 

 

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