UK unemployment held at a 42-year low in the third quarter of this year, but there are signs that the labor market is slowing as the number of people in work fell for the first time in almost a year.
The jobless rate averaged 4.3 percent from July to September, the British Office for National Statistics said yesterday.
However, employment fell by 14,000, the first decline since October last year and the biggest drop since June 2015.
Basic wage growth remained at just more than 2 percent, well below the rate of inflation, and the number people neither in work nor looking for a job rose by the most in more than seven years.
The mixed figures help to explain why the Bank of England (BOE) raised interest rates for the first time in a decade this month and why economists expect the next increase to be a year away.
For officials, including BOE Governor Mark Carney, the erosion of slack warranted higher rates. The jobless rate is below the BOE’s “equilibrium” rate and officials expect it to fall further to 4.2 percent.
However, questions remain over how the labor market will fare as the economy battles the headwinds of Brexit.
Consumer spending is already under pressure from the strain on incomes, with data to be released today forecast to show retail sales fell last month from a year earlier — the first such drop since 2013.
Basic pay in the third quarter grew an annual 2.2 percent, lagging behind an inflation rate that averaged 2.8 percent in the period. Inactivity climbed by 117,000 in the latest quarter, the most since 2010.
The good news for households is that the squeeze might be past the worst. Inflation is forecast to peak close to its current level of 3 percent, and the BOE expects real wage growth to return this year.
Output per hour rose by 0.9 percent, the most since 2011, according to a flash estimate yesterday.
However, that followed two quarters of falling productivity, meaning that over the past 12 months productivity has grown just 0.6 percent, the office said.
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