UK unemployment rate falls to new 7-year low, pay growth edges up

OCT 14, 20155:21 PM

[LONDON] Britain's unemployment rate unexpectedly fell to its lowest level since mid-2008 in the three months to August but pay growth was a touch slower than expected by economists.

The Office for National Statistics said Britain's unemployment rate fell to 5.4 per cent, down from 5.5 per cent in the three months to July.

It was the lowest jobless rate since the second quarter of 2008, before the worst of the financial crisis, and was below a median forecast of 5.5 per cent in a Reuters poll of economists.

The number of people in employment jumped by 140,000, pushing the employment rate to 73.6 per cent, the highest since records began in 1971, while those unemployed fell by 79,000, the biggest fall since the three months to January.

The total earnings of workers - including bonuses - rose by 3.0 per cent, edging up from the three months to July, but short of a forecast of 3.1 per cent in the Reuters poll.

In the month of August alone, total wages in the private sector, which are monitored closely by the Bank of England, rose by 3.5 per cent, slowing from 4.3 per cent.

The growth in pay in recent months has helped restore spending power for many households who took a big hit in the aftermath of the financial crisis as wages stagnated and inflation rose.

By contrast, consumer price inflation in September dipped back below zero, according to data released on Tuesday.

Excluding bonuses, average weekly earnings growth slowed slightly to 2.8 per cent in the three months to August, down from 2.9 per cent in the three months to July which was the strongest growth rate in over six years.

The Bank of England is watching closely for signs of a further pickup in pay as it considers when to start raising interest rates for the first time since the financial crisis.

Wage growth remains weaker than before the crisis but has picked up faster than the BoE expected earlier this year. At the same time, productivity is growing more quickly, which could help slow the return of inflation.

BoE Governor Mark Carney has said a decision about whether to raise interest rates is likely to become clearer around the turn of the year.

Wednesday's data showed the number of people claiming unemployment benefits, rose by 4,600 to just over 796,000 in September. It was the first time since mid-2012 that the claimant count rose in two consecutive months.

REUTERS