UK unemployment at four-decade low

British households are feeling the strain of rising prices since last year's Brexit vote.

london - The jobless rate edged down to 4.4 per cent in the three months to June

Published: Wed 16 Aug 2017, 8:55 PM

Last updated: Wed 16 Aug 2017, 10:57 PM

Britain's labour market outperformed tepid growth in the rest of the economy in the second quarter as the unemployment rate unexpectedly fell to its lowest since 1975, official data showed on Wednesday.

Sterling jumped nearly half a cent against the US dollar and British government bond prices slid after the jobless rate edged down to 4.4 per cent in the three months to June, against expectations for it to hold at 4.5 per cent in a Reuters poll of economists.

Figures on wage growth also came in better than expected but they were flattered by bonus payments in the financial sector. The underlying picture still showed households feeling the strain of rising prices since last year's Brexit vote.

"Ongoing anaemic earnings growth reinforces the case for the Bank of England to hold off from an interest rate [hike] any time soon - especially given a struggling economy and highly uncertain outlook," said Howard Archer, chief economic adviser to the EY ITEM Club.

Inflation has eased slightly since May when it hit an almost four-year high of 2.9 per cent, but prices are still rising faster than wages.

The Office for National Statistics said workers' total earnings including bonuses rose by an annual 2.1 per cent in the three months to June, compared with 1.9 per cent in the period to May, boosted by a 27 per cent surge in bonus payments in the financial sector.

Economists taking part in a Reuters poll had expected wage growth of 1.8 per cent.

Overall wage growth in real terms fell by 0.5 per cent, the same as in the three months to May and one of the steepest declines in the past three years.

Excluding bonuses - which analysts say gives a better picture of the underlying trend - earnings in nominal terms rose by 2.1 per cent year on year, the fastest rate since January and beating expectations for a two per cent rise.

The Bank of England is watching wage growth closely as it gauges whether the increase in inflation is creating longer-lasting pressure on prices. It expects wages to rise by two per cent this year before picking up in 2018 and 2019.

Separate ONS figures showed productivity - perhaps Britain's biggest economic weak point since the financial crisis - fell by 0.1 per cent in output-per-hours terms during the second quarter compared with the first quarter, when it fell 0.5 per cent. - Reuters