U.K. Unemployment Hits Decade Low as Labor Market Tightensby
Wage growth excluding bonuses slows less than expected
Debate on when to raise interest rates hinges on productivity
U.K. unemployment unexpectedly fell to the lowest in almost a decade and wage growth slowed less than economists forecast as the labor market continued to strengthen.
Pay excluding bonuses rose 1.9 percent in the three months through November from a year earlier compared with 2 percent in the quarter through October, the Office for National Statistics said in London on Wednesday. Economists in a Bloomberg survey had predicted 1.8 percent. Unemployment fell to 5.1 percent, the lowest since the three months through January 2006.
For Bank of England rate-setters, the decision about when to begin exiting almost seven years of emergency stimulus hinges on productivity. As labor shortages emerge, inflationary pressures will build unless companies can boost the output of each worker.
BOE Governor Mark Carney said on Tuesday that recent pay figures suggest there is still enough slack in the labor market to maintain the benchmark rate at 0.5 percent for now. With inflation close to zero and the world economy slowing, a growing number of forecasters say the BOE will refrain from raising rates until the end of 2016.
“It is an encouraging report that should keep consumer confidence and spending running at healthy levels,” said James Knightley, an economist at ING Bank NV in London. “However, with Mark Carney suggesting there is little appetite for a rate hike any time soon and with the prospect of a Brexit vote set to weigh on activity it looks as though November remains the earliest possible opportunity for a rate rise.”
The pound pared losses against the dollar after the data and was trading at $1.4163 as of 11:51 a.m. London time, little changed since Tuesday.
Unemployment fell 99,000 between September and November to 1.68 million and employment climbed 267,000 to a record 31.4 million. Claims for jobless benefits, a narrower measure of unemployment, fell 4,300 in December and the claimant rate stayed at 2.3 percent. In November, the total dropped 2,200 instead of the 3,900 increase originally estimated. Inactivity -- those not looking for work -- was 21.9 percent in the latest three months, matching a 25-year low.
“Unemployment is now below where it was before the recession,” Prime Minister David Cameron said on Twitter. “We must stick to our plan to keep delivering jobs and security for people.”
Unemployment in November fell to 4.9 percent, the lowest since September 2005, one-month figures show. Wages excluding bonuses accelerated to 2.1 percent from 1.6 percent in October.
Total pay growth, including bonuses, eased to 2 percent in the three months through November from 2.4 percent in the previous period.
Separate data released by the BOE on Wednesday suggested low inflation was bearing down on pay settlements, despite “pockets of strong wage growth where skills shortages were acute.” The central bank’s survey of regional business contacts, compiled between late November and late December, also found the softening in pay growth partly reflected slowing activity in manufacturing.