UK jobless rate drops to pre-crisis low

Sarah O’Connor

Britain’s labour market has perked up, pushing down unemployment to a seven-year low and propelling the employment rate to a record high.

Unemployment fell in the three months to August from 5.5 per cent to 5.4 per cent, the lowest since early 2008, official data show. Meanwhile the employment rate — the proportion of the adult population that is in work — rose to a fresh record of 73.6 per cent.

The figures contrast with the previous five months when the jobs boom slowed and the unemployment rate hovered between 5.5 per cent and 5.6 per cent, raising questions over whether the labour market recovery had run its course.

“The UK’s labour market recovery is back on track after the dip in employment in the spring,” said Ruth Miller, an economist at Capital Economics.

The data offered some reassurance that the UK economy has continued to grow in spite of the global slowdown and market jitters in China.

“We’ll probably see some slowdown in overall [gross domestic product] growth in the third quarter, reflecting more uncertain global conditions, but the health of the jobs market continues to underpin the domestic economic recovery,” said John Hawksworth, PwC’s chief economist.

However, wage growth was slightly slower than economists had expected: average weekly pay was 3 per cent higher than a year ago including bonuses and 2.8 per cent higher excluding them; a touch slower than last month’s 2.9 per cent. Still, with no inflation in the UK, that means a significant boost to workers’ spending power.

“We are seeing substantial increases in real household earnings, which is supporting consumer confidence and should help boost consumer spending growth,” said James Knightley, an economist at ING. “This is clearly a positive for domestic activity and offers more evidence to suggest that market expectations of the first Bank of England rate rise being more than a year away seem too cautious.”

There were 31.1m people in work in the three months to August, about 140,000 more than in the previous three months. About 85 per cent of those new workers were designated as employees, while the remainder were self-employed.

Employment rose in every sector of the economy except the public sector, where it continued to fall because of deep government spending cuts. There were 5.36m people employed in the public sector in June, down 59,000 from a year earlier and the lowest figure since comparable records began in 1999.

Public sector workers have also felt the pain in their pay packets. Average wages in the public sector are still 4.2 per cent lower than before the financial crisis in real terms, according to the Resolution Foundation think-tank. Average pay in the finance and retail sectors are still 2.4 per cent and 3.2 per cent below pre-crisis levels.

Unemployment among 18 to 24 year olds, which peaked at 20 per cent after the recession, fell particularly sharply to 13.3 per cent. Meanwhile unemployment among “prime-age” adults aged 35 to 49 fell to just 3.5 per cent. /The Financial Times