UK jobless rate hits lowest since 2005 but wage growth weakens
Britain’s unemployment rate fell unexpectedly to its lowest in more than a decade in the three months to January, but pay growth worsened in an unpromising sign for the economy ahead of its divorce with the European Union.
According to the Office for National Statistics, the jobless rate fell to 4.7 percent from 4.8 percent, marking its lowest level since the summer of 2005. But inflation is now rising again quickly, pushed up by the post-Brexit vote slump in the value of the pound.
In January alone inflation-adjusted pay growth contracted by 0.2 percent, the first shrinkage since August 2014, the Office for National Statistics said.
Pay growth, adjusted for inflation, halved to just 0.7 percent, the lowest since October 2014, which was shortly before inflation plunged to just below zero and made it easier for households to cope with slow pay growth.
The outlook for consumer spending is critical for Britain’s economy as it begins the process of leaving the EU. Consumers kept up their spending after June’s Brexit referendum shock but there have been signs that they are turning more wary.
The weakness in pay growth is likely to reassure the Bank of England that it should keep borrowing costs at their record low for longer, despite the pick-up in headline inflation.
The BoE, which is due to announce its interest rate decision for March on Thursday, is watching closely for any signs that rising inflation is feeding through into pay pressure.
Wednesday’s data showed growth in pay including bonuses slipped to 2.2 percent in the three months to January, the weakest since the three months to April last year and worse than forecast in a Reuters poll of economists.
The BoE said last month it expected a jobless rate of 5.0 percent in a year’s time, although that was lower than its previous forecast of 5.5 percent.
While rising employment has been one of Britain’s economic success stories over the last few years, new figures from the ONS showed almost a million people in work were on zero-hours contracts – jobs with no guarantee of work.
The number of workers on these contracts rose to 905,000 in the three months to December, up by 101,000 in the space of a year and representing almost 3 percent of people in employment.
Source : Reuters