UK unemployment declined and a measure of the number of people in work rose to a record, pushing the labour market closer to “full capacity,” according to the statistics office.
The number of jobless fell 7,000 in the fourth quarter to 1.6 million people, leaving the unemployment rate at 4.8 per cent, the lowest in more than a decade. Employment increased by 37,000 to 31.8 million, and the rate rose to a record 74.6 per cent, the Office for National Statistics (ONS) said on Wednesday.
However, the increase in employment and labour shortages in some areas is not being fully reflected in wages. The latest data showed basic pay growth slowed in the quarter to 2.6 per cent from 2.7 per cent, weaker than economists had forecast. Increases in total pay also slowed, in part reflecting the timing of bank bonuses. The pound weakened against the dollar after the data were released and was at $1.2428 in early morning trading, down 0.3 per cent on the day.
While employment is still rising, the pace has cooled over the past year, and uncertainty as Britain prepares to begin talks to leave the European Union is expected to take a further toll on hiring. Bank of England officials now believe there is more slack in the labour market than previously thought, which should keep a lid on wage demands. Firms told the bank recently that they expect wage increases to slow to about 2.2 per cent this year. With inflation accelerating, that will eat into real-pay growth, which at 1.4 per cent in the last three months of 2016 was the weakest since the start of 2015.
The ONS data also said that the claimant count – a narrower measure of unemployment – plunged 42,400 in January after a revised 20,500 drop in December. That office said changes to Universal Credit benefits is affecting its seasonal adjustments, which means the data can be volatile from month to month.
