U.K. Unemployment Remains at 6% as Wage Growth AcceleratesEshe Nelson
U.K. unemployment held at a six-year low in the third quarter and wage growth accelerated as the labor market continued to improve.
The jobless rate based on International Labor Organization methods was 6 percent, the same as in the three months through August, the Office for National Statistics said in London today. Wages grew an annual 1 percent, faster than the 0.8 percent predicted by economists in a Bloomberg survey, and basic pay outstripped inflation for the first time since 2009.
The Bank of England kept its key interest rate at 0.5 percent last week amid signs that economic growth is weakening. The pickup in wage growth may strengthen the minority view on the Monetary Policy Committee last month that an immediate rate increase was needed to stop pay pressures from building. BOE Governor Mark Carney is due to present new economic forecasts at a press conference at 10:30 a.m. in London.
“The healthy labor market is a key factor why we believe the BOE will hike rates” in the second quarter of 2015, said James Knightley, senior economist at ING Bank NV in London. “Carney is unlikely to rock the boat today. He will probably emphasize economic uncertainty relating to the euro zone and the fact that inflation remains well below target.”
The pound pared its decline against the dollar and traded at $1.5932 at 9:50 a.m. London time.
Economists had forecast that the ILO jobless rate would fall to 5.9 percent in the third quarter, based on the median of 36 estimates in a Bloomberg survey. Unemployment fell by 115,000 to 1.96 million, marking the smallest decline since the three months to February, while the number of people in work climbed 112,000 to 30.8 million.
Excluding bonuses, pay growth accelerated 0.4 percentage point to 1.3 percent, beating consumer-price inflation for the first time since September 2009, the ONS said. Inflation stands at 1.2 percent.
The nine-member Monetary Policy Committee split 7-2 for a third month in October, with two officials voting to increase borrowing costs to guard against the risk of sharp increase in wage growth. For the majority, inflation pressures remained weak. Minutes of its meeting this month will be published on Nov. 19.
Recent reports point to a weakening in activity, with exports to the euro region sliding, services growth at a 17-month low and house prices falling. Investors have pushed back bets on the first quarter-point rate increase to beyond next October, Sonia forwards show.
The unemployment figures suggest the labor market may be losing some momentum, with the jobless rate failing to fall for the first time since the three months through January. Experimental monthly figures showed that the rate rose to 6.1 percent in September from 5.9 percent in August.
Jobless claims fell 20,400 in October, in line with the 20,000 decline forecast by economists in a Bloomberg survey. Claims fell 18,400 in September instead of the 18,600 initially estimated.