United Kingdom: Cracks appear in the labor market in August
The unemployment rate ticked up to 3.9% in June-August from 3.8% in the previous rolling quarter. Moreover, employment contracted by 56,000, confounding market expectations of a rise, while the number of job vacancies continued to decline. These figures indicate that political uncertainty—notably regarding the possibility of a no-deal exit from the EU at end-October—has finally clipped the wings of the labor market, which had until now remained fairly impervious to Brexit developments. That said, nominal wage growth remained solid at 3.8% in June-August, markedly outpacing inflation, which should prop up private consumption.
Hiring is likely to remain subdued in coming months on Brexit uncertainty. Looking further ahead, the outcome of Brexit will have a key bearing on the evolution of the labor market. On balance though, our panelists see unemployment staying low and continued growth in real disposable incomes next year, which should support household spending.