United Kingdom: Unemployment rate ticks up in July-September, but wage pressures intensify
November 13, 2018
In the July-September period the unemployment rate unexpectedly increased to 4.1%, due to employment growth failing to keep up with the increase in the size of the labor market. Employment rose by a mere 23,000 compared to April-June, on the back of more full-time positions offsetting a fall in part-time positions. Together with soft jobs growth figures in recent months, this is a possible sign that Brexit uncertainty is causing firms to delay hiring decisions.
Despite the slight uptick in the unemployment rate, the labor market remains tight, leading wage pressures to climb in July-September. Nominal earnings growth excluding bonuses increased to 3.2% (June-August: +3.1% year-on-year), as a result of faster wage growth in both the public and private sectors.
Looking ahead, wages should continue to be supported by hiring difficulties, a record-high vacancy rate and faster pay growth in the public sector. Moreover, an ongoing decline in the number of EU nationals working in the UK could add further upward pressure. On the employment side, job growth will likely stay subdued until more clarity emerges regarding the UK’s future relationship with the EU.
UK Unemployment Rate Forecast
Our panelists currently see the unemployment rate averaging 4.3% in 2019 and 4.4% in 2020, while real disposable income is seen increasing 1.5% in both 2019 and 2020.
Author: Oliver Reynolds, Economist