Employment rate reaches new high, but wage growth slows

20th January 2016


The employment rate was at its highest level since records began in 1971, official figures show.

Office for National Statistics data for September to November 2015, 74% of people aged from 16 to 64 were in work.

The unemployment rate for September to November 2015 was 5.1%, down from 5.8% for a year earlier.

However, wage growth was at its slowest since February. Average weekly earnings for UK employees increased by 2.0% including bonuses and by 1.9% excluding bonuses compared with a year earlier.

There were 31.39 million people in work, 267,000 more than for June to August 2015 and 588,000 more than for a year earlier.

There were 1.68 million unemployed people (people not in work but seeking and available to work), 99,000 fewer than for June to August 2015 and 239,000 fewer than for a year earlier.

Of those unemployed, 919,000 were men and 756,000 were women.

Ben Brettell, senior economist at Hargreaves Lansdown says: “Another day, another data release underlining the case for leaving interest rates on hold.

“Today’s data from the ONS shows wages including bonuses rose 2% in the three months to November, the slowest increase since February. However, with inflation running close to zero this still means workers are experiencing significant pay rises in real terms.

“Despite the slowdown in pay growth, there were also encouraging signs in the ONS report – the unemployment rate fell unexpectedly to 5.1%, and the number of people with jobs climbed by a bigger-than-expected 267,000.

“Along with improving economic growth and rising core inflation, accelerating wage growth has been cited by the Bank of England as a prerequisite for judging that higher interest rates are appropriate. For much of last year wages appeared to be on an improving trend, but the last two data sets have seen the rate of growth slow from 3% to 2%.

“When combined with intensifying concerns over the global economy and the looming risk of Brexit, it appears the chance of an interest rate rise in 2016 is receding into the distance”.

Andy Scott, economist at currency specialist HiFX says: “Sterling was given a slight lift on Wednesday after employment data showed wage growth slowed less than expected in November, and unemployment fell again, to its lowest in nearly a decade. The Pound rose from its lowest in almost seven years against the Dollar, and from a one-year low against the Euro, but today’s data may only provide a brief respite from the downwards momentum sterling has been facing.

“With investors spooked by the sharp falls in stock markets this year amid deepening concerns over global growth, we’re continuing to see money flowing out of any perceived risk currencies or assets, and into ‘safe haven’ ones.

“Whilst sterling ordinarily wouldn’t be on the list of risk currencies, this year’s potential referendum on the UK’s EU membership and the latest polls showing the outcome would be a ‘Brexit’, leave it firmly in that category. It’s the uncertainty of how such an outcome would impact the UK economy that worries investors, so the sensible move in the current environment is to limit your exposure to such an event risk.

“Yesterday’s comments from Mark Carney, indicating now is not the time to raise interest rates, and lack of any timetable for a potential rate hike have only served as further reason to sell sterling. The combination of a lack of inflationary pressures, but perhaps more importantly, concerns over economic growth are having a negative impact on confidence over the economy in the year ahead.

“The 1.40 level in GBP/USD will be a big psychological test for the market which, if breached, opens up risks to the low after the 2008/9 financial crisis which is 1.35.

“Sterling is into undervalued territory here and we expect it to start to recover back above 1.50 this year. Against the Euro however, we feel there is further downside risks towards 1.25 this year – however, sterling is due some form of correction given that it has fallen almost 10% since the beginning of December.”

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