United Kingdom: Wage growth accelerates in June-August, but labor market loses steam
October 17, 2018
In the June-August period the unemployment rate stayed at 4.0%, the joint-lowest rate since 1975 and below the Central Bank’s estimate for the equilibrium unemployment rate of 4.25%. However, employment contracted 5,000 over the March-May period, as a decline in part-time work more than offset more full-time positions. Employment has lost momentum in recent months, a possible sign that Brexit uncertainty is causing firms to delay hiring decisions.
Wage pressures continued to build in June-August on the back of the tight labor market, with nominal earnings growth excluding bonuses increasing to 3.1% (May-July: +2.9% year-on-year). The uptick was a result of faster wage growth in both the public and private sectors.
Looking ahead, wages should continue to be supported by low unemployment and consequent hiring difficulties, while employment figures will likely stay subdued until the UK and EU reach a Brexit withdrawal agreement.
UK Unemployment Rate Forecast
Our panelists currently see the unemployment rate averaging 4.2% in 2019 and 4.3% in 2020.
Author: Oliver Reynolds, Economist