U.K. Labor Market Shows Continued Resilience to Brexit Vote

U.K. unemployment rate stayed at an 11-year low in the three months through July as the economy added jobs, according to figures from the Office for National Statistics.

Key Points

  • Unemployment fell 39,000 to 1.63 million, leaving jobless rate at 4.9 percent (matching median forecast)
  • Number of people in work rose 174,000 to 31.8 million, highest on record
  • In July alone, unemployment rate fell to 4.7%, lowest since September 2005
  • Earnings excluding bonus payments slowed to 2.1% (median forecast 2.2%)

Big Picture

The figures add to evidence that the economy has fared better than predicted since the June decision to leave the European Union. The Bank of England expects unemployment to rise gradually, reaching 5.6% by mid-2018. That, combined with pressure on real wages as inflation gathers pace, is likely to weigh on consumer spending, which has driven the economy in recent years. BOE officials, who cut interest rates last month in an attempt to limit the Brexit fallout, are expected to leave policy unchanged this week. Their decision will be announced at noon on Thursday.

Economist Takeaways

  • The employment figures have held up well despite Brexit because the data is a rolling three-month figure,” said ING economist James Knightley. “We have to remember that it also takes time for businesses to react to shock outcomes, like the Brexit vote. Few businesses would pull job offers they had already made because of the outcome”
  • Several surveys “suggest that hiring intentions have weakened substantially. Consequently, we expect to see softer jobs growth in coming months,” he said

Other Details

  • Employment fell by 105,000 in July alone, most since March 2015
  • Number of people claiming jobless benefits rose 2,400 to 771,000 in August (median forecast was 1,800 increase)
  • Average earnings growth slowed to 2.3% between May and July (median forecast 2.1%)
  • Number of job vacancies in the economy climbed 3,000 to 752,000 in three months through August

— With assistance by Mark Evans

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