Britain’s unemployment rate fell unexpectedly to a new 43-year low in the three months to June and productivity rose, but there was little upside for most workers as pay growth slowed to its weakest in nine months.
Tuesday’s official figures also showed the sharpest annual fall in the number of EU workers in Britain since 1997, continuing a trend seen since the 2016 Brexit vote.
The figures painted a familiar picture of tightness in Britain’s labour market — including record high job vacancies — failing to translate into strong wage growth.
“This will not be what the Bank of England will have wanted to see, as one of the justifications for (its) decision to hike rates earlier this month was that it was expecting wage growth to start lifting off. This hasn’t happened yet,” said Emma-Lou Montgomery, an associate director at Fidelity International.
The BoE raised interest rates for only the second time since the financial crisis earlier this month.
Tuesday’s data also showed productivity grew at its fastest annual rate since late 2016 and the number of people whose main job was an insecure zero-hours contract fell by the most since 2000, the Office for National Statistics said.
The unemployment rate fell to 4.0 per cent in the April-June period, the lowest since the three months to February 1975 and beating economists’ forecasts for it to hold steady at a previous low of 4.2 per cent.
The drop came despite a smaller-than-expected number of jobs created over the three-month period, of 42,000 — less than half the average forecast by economists in a Reuters poll.
“Overall the data could be described as mildly positive for the pound, and the currency quickly spiked up to its highest level of the day not long after the release,” said David Cheetham, chief market analyst at currency broker XTB.
“This seemed to be a bit of a knee-jerk reaction to the unemployment figures and the gains have been pared as traders digested the miss in wages,” he added.
Total annual wage growth slowed to a nine-month low of 2.4 per cent, below forecasts for it to hold at 2.5 per cent. The ONS said changes to the timing of annual bonus payments was partly responsible.
Excluding bonuses, pay growth held steady at 2.7 per cent, well below the 4 per cent rate typical before the financial crisis a decade ago.
Output per hour worked grew by 1.5 per cent year-on-year in the April-June period, the biggest increase since late 2016 after a 0.9 per cent rise in the first quarter of 2018.
Britain’s economy warmed up a little in the second quarter from its winter slowdown of early 2018, official data showed last week, but there was no sign of an end to its stuttering performance ahead of Brexit next year.
With less than eight months until Britain is due to leave the European Union, the ONS data showed an acceleration of EU nationals leaving Britain’s workforce.
In the second quarter there were 2.35 million EU nationals working in Britain, down 86,000 on a year ago — a 3.6 per cent drop that was the largest since records began.
The number of nationals from the eight East European countries that joined the EU in 2004 fell by 117,000, an 11.7 per cent drop on the year.
The number of workers employed on often-precarious zero-hours contracts fell by a similar amount over the year — the biggest drop since 2000 — to 780,000 or 2.4 per cent of the workforce, the smallest since 2015.