U.K. wages rise at fastest pace since 2008, employment jumps

INTERNATIONAL – U.K. wages rose at their fastest pace in 11 years in the three months through June and employment climbed to a record high.

The stronger-than-forecast figures from the Office for National Statistics suggest the labor market remains tight, meaning the Bank of England is unlikely to join the global rate-cutting trend, at least for now.

However, the unemployment rate rose as more people actively started looking for work, and there were some signs that the jobs market is succumbing to the Brexit jitters weighing on the wider economy, with vacancies falling to their lowest level since early 2018.


Key Insights

Average earnings excluding bonuses rose 3.9% from a year earlier, the most since the second quarter of 2008. Total earnings growth accelerated to 3.7%.
  • Wage growth is comfortably outpacing inflation, which averaged 2% during the period. Figures boosted by timing of wage increases in the National Health Service.

  • The number of people in work rose by a stronger-than-forecast 115,000, taking the employment rate to a joint-record high of of 76.1%.

  • Jobs growth was not enough to absorb the growth in the active labor force, pushing up the jobless rate to 3.9% from a 44-year low of 3.8%. Inactivity stood at a joint-record low of 20.7%.

  • Weak productivity growth is fueling domestically generated price pressures. Separate figures Tuesday show output per hour fell 0.6% in the second quarter from a year earlier, the fourth decline in a row.

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  • Strong labor market boosted consumer spending again in the second quarter, when the economy as a whole shrank for the first time since 2012.
  • But jobs growth has slowed this year. That may reflect weaker demand for labor and/or firms finding it hard to find suitable candidates.
  • Employment in the latest three months was driven by employee jobs, though self-employment accounted for almost 30% of the gain. Women accounted for three quarters of the total increase.
  • Vacancies fell 20,000 to 820,000 in the three months through July, the lowest level since Feb.-April last year.
  • There were 99,000 more EU nationals working in the U.K. than a year earlier.
  • Markets are pricing in a BOE rate cut in the event of a no-deal Brexit.
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