United Kingdom: Labor market stays resilient in October-December despite Brexit uncertainty

In the October-December period the unemployment rate remained at 4.0%, the joint-lowest rate in over 40 years. Employment rose by 167,000 compared to July-September, topping market expectations, due to a surge in full-time positions. Moreover, the employment rate was the joint-highest since comparable records began in 1971. The figures show that intensifying Brexit uncertainty has yet to overly affect firms’ hiring intentions—although that could change in the early part of 2019, as the country moves closer to exiting the EU without a deal.

The tight labor market continued to feed through to wage pressures, with nominal earnings growth excluding bonuses remaining at a multi-year high of 3.4%, markedly outpacing the rate of inflation.

Looking ahead, wages should continue to be supported by the limited slack in the labor market and more generous public-sector pay agreements. Regarding employment, Brexit uncertainty could begin to dampen momentum this year; indeed, January’s PMIs showed that services and manufacturing firms trimmed staff levels in the month.

UK Unemployment Rate Forecast

Our panelists currently see the unemployment rate averaging 4.2% in 2019 and 4.3% in 2020, while real disposable income is seen increasing 1.3% in both 2019 and 2020.