11th November 2015
Unemployment dropped to a seven-year low of 5.3% in the thr three months to September.
The jobless rate was at its lowest since 2008, according to the Office for National Statistics.
The number of people out of work fell by 3,000 between July and September to 1.75 million.
There were 31.21 million people in work, marking an increase of 177,000 compared to the previous quarter and 419,000 higher than in the same period last year.
Total earnings including bonuses, were up 3% in the three months to September compared to a year earlier.
Excluding bonuses, average weekly earnings growth slowed to 2.5% in the third quarter and 1.9% in September, both the weakest since the first quarter of 2015.
The experts share their views:
Shaun Port, chief investment officer of Nutmeg, says: “The jobs market remains strong in the UK. The prevalence of part time or reduced hours work, the ready supply of unskilled and semi-skilled labor from the continent, and a still cautious business sector are all keeping a lid on wage pressure. That’s good news for Mark Carney, who is casting around for any excuse not to have to begin raising rates soon. But the tightness of the labour market makes higher wages inevitable over the next 6 months.”
Chris Towner, chief economist at HiFX, says: “Sterling dropped marginally when the UK employment report was released this morning, suggesting that the economy remains not too hot and not too cold, allowing the Bank of England to continue to sit on their hands for the foreseeable future.
“The good news from the report came in the fact that the number of unemployed in the UK has made significant progress over the last years and it was only in 2011 that we were in the darkest days after the credit storm with unemployment at 8.5%. Average earnings dropped to 3% y/y, below expectations of 3.2%; however there is still a comfortable gap of 3% for the consumer between earnings and inflation.
“Although sterling dropped following the release of the report, overall the economy is steady and calm giving the Bank of England opportunity to continue to monitor and comment without requiring any real action.”
Helal Miah, investment research analyst at The Share Centre, says: “Whilst these figures are encouraging, some disappointment has come from the rate of increases in pay which came in at 2.5%, less than the expected 2.7%. This somewhat justifies the Bank of England’s very dovish tone set during last week’s Super Thursday. The Bank believes that there are no inflation pressures to warrant a rise and these figures will provide a little more evidence to confirm that.
“On release of the result, sterling fell a little against other major currencies and this should in theory support the view that interest rate rises in the UK are likely in the second to third quarter of 2016. These results further support our view that equities remain the asset class of choice for investors.”
Laith Khalaf, senior analyst, Hargreaves Lansdown, says: “Unemployment now stands at its lowest level since before the ravages of the financial crisis, signalling an economy which has already done a great deal of healing. This picture looks even brighter when you consider we are now also seeing a significant rise in wages, which should be further boosted by the introduction of the national living wage next April.
“While inflation is close to zero this presents a conundrum for the Bank of England. On the one hand, the recovery in the labour market suggests interest rates should rise, on the other, Mark Carney is currently writing monthly letters to the Chancellor to explain why inflation is so far below target.
“The natural reaction to two such competing forces is maintenance of the status quo, which is why we shouldn’t pencil in a rise in interest rates for some time to come. The market currently anticipates a rate rise in the middle of next year, though for the last six years the market forecast has been woefully ahead of the curve.”