UK unemployment falls to seven year low; wage growth rise slower than expected

FXStreet (Mumbai) - The Office for National Statistics (ONS) today released figures which showed UK unemployment rate fell to a seven-year low of 5.3% in the three months to September. It was the lowest jobless rate since the second quarter of 2008. Economists polled by Reuters had expected the rate to hold steady at 5.4 per cent.

ONS data shows fall in unemployment rate

The number of people out of work fell by 103,000 between July and September to 1.75 million, the biggest fall since the three months to September of last year, the ONS data showed. There were 31.21 million people in work, 177,000 more than for the April-to-June quarter and 419,000 more than in the same period a year earlier.
The unemployment rate, which rose as high as 8.5 per cent in 2011, has plunged over the past couple of years and in 2015 it has again fallen faster than the BoE expected.

Earnings grew more slowly than expected

Wage growth has not risen as strongly as the Bank projected. Earnings grew more slowly than expected, backing the Bank of England’s stance to not hike raise interest rates in a hurry. In the month of September alone, total wages rose by 2.0, a sharp slowdown from 3.2 per cent in August and the weakest increase since February this year.

The ONS also said the total earnings of workers, including bonuses, in the three months to September was up 3% from a year earlier, same rate as in the three months to August and slower than a forecast of 3.2 per cent in the Reuters poll of economists. Excluding bonuses, average weekly earnings growth slowed to 2.5% in the third quarter and 1.9% in September, both the weakest since the first quarter of 2015. In September, total wages rose by 2.0%, down from 3.2% the previous month and the weakest increase since February.

Slow wage growth proves BoE’s decision to hold rate right

The BoE is watching the wage growth closely as it considers raising rates for the first time in eight years. The wage growth, as expected by the BoE, continues to remain weak, highlighting the need to keep the interest rate at a record low of 0.5 per cent for some more time.

In Britain average earnings have, since the financial crisis lagged inflation. The situation has however started looking up in recent times with wages picking up and inflation falling below zero. The BoE has earlier stated that Britain's near-zero inflation rate would only pick up slowly even if interest rates stayed on hold throughout next year.
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