UK unemployment held at a 42-year low in the three months through August and the number of people in work approached a record high, according the figures published Wednesday.
The latest snapshot of the labour market from the Office for National Statistics may help to explain why the Bank of England (BOE) appears to be edging toward its first interest-rate increase for a decade.
Wage growth was little changed at just over 2 per cent - well behind the rate of inflation - but officials are signalling they are no longer prepared to wait for a pickup before tightening policy.
In evidence to lawmakers on Tuesday, BOE Governor Mark Carney made clear that the erosion of slack in the economy is the primary concern as policy makers prepare for their November 2nd meeting.
The jobless rate stood at 4.3 per cent in the latest period, staying below the 4.5 percent rate regarded by the BOE as the “equilibrium rate”. The number of people looking for work fell 52,000 to 1.44 million.
Employment rose 94,000 to 32.1 million. At 75.1 per cent, the employment rate is just below the record 75.3 per cent recorded in May to July.
With the labour market tight and Brexit curbing immigration, boosting growth without generating inflation may require a significant improvement in productivity, something considered unlikely given the dismal performance of recent years and the effect Brexit is having on investment.
The pressure on living standards continued in the latest three months, with regular pay growth falling in real term for a sixth month. For some, that may be a reason to hold off raising rates.
But the squeeze may be past the worst, with recent surveys showing a pickup in wages and inflation expected to peak close to its current rate of 3 per cent before subsiding.
-(Bloomberg)
