UK unemployment unexpectedly fell to the lowest in almost a decade and wage growth slowed less than economists forecast as the labour market continued to strengthen.
Pay excluding bonuses rose 1.9 per cent in the three months up to November from a year earlier compared with 2 per cent in the quarter up to October, the UK Office for National Statistics said on Wednesday. Economists had predicted 1.8 per cent rise. Unemployment fell to 5.1 per cent, the lowest since January 2006.
For Bank of England rate-setters, the decision about when to begin exiting almost seven years of emergency stimulus hinges on productivity. As labour shortages emerge, inflationary pressures will build unless companies can boost the output of each worker.
Bank of England governor Mark Carney said on Tuesday that recent pay figures suggest there is still enough slack in the labour market to maintain the benchmark rate at 0.5 per cent for now.
With inflation close to zero and the world economy slowing, a growing number of forecasters say the central bank will refrain from raising rates until the end of 2016.
“It is an encouraging report that should keep consumer confidence and spending running at healthy levels,” said James Knightley, an economist at ING Bank NV in London. “However, with Mark Carney suggesting there is little appetite for a rate hike any time soon and with the prospect of a Brexit vote set to weigh on activity it looks as though November remains the earliest possible opportunity for a rate rise.”
- Bloomberg
