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UK employment falls by most since 2015 as Brexit nears

 The number of people in work in Britain fell by the most in more than two years in the three months to September, a sign that a Brexit slowdown may be taking its toll on the economy’s strong run of job creation.
 
William Schomberg, Estelle Shirbon
5 MIN READ
ECONOMY
NOVEMBER 15, 2017 / 9:35 AM / UPDATED 2 HOURS AGO
 
After rising strongly in recent years, the number of people in employment fell by 14,000, official data showed on Wednesday.
 The inactivity rate — a measure of people not in work and not seeking a job — rose by the most in nearly eight years.
 
“After two years of almost uninterrupted growth, employment has declined slightly on the quarter,” said Matt Hughes of the Office for National Statistics.
 
The number of people in work remained higher than a year earlier, however, and statistician Hughes warned that people should not read too much into figures for one quarter.
 
The last time the number of people in work in Britain fell was in the three months to October last year, although that decline was small.
 
The biggest fall in employment in the latest figures occurred among people aged between 18 and 24, suggesting some of the weakness might be due to young people giving up work to pursue their studies, although the seasonally adjusted figures should smooth out that effect.
 
“A fall in employment over the quarter suggests that persistent lacklustre economic growth and appreciable economic and Brexit uncertainties may be starting to rein in the labour market’s strength,” said Howard Archer, an economist with EY Item Club, a forecasting body.
 
Britain’s economy initially withstood the shock of last year’s decision by voters to leave the European Union but has slowed in 2017 and is growing at half the rate of Germany. Most forecasters expect it to slow further in 2018.
 
George Buckley, an economist with Nomura, said the fall might reflect the slowdown in the overall economy in the first half of 2017 and could be reversed if some early signs of a slight recovery in the second half of the year are maintained.
 
The ONS said the unemployment rate held at a four-decade low of 4.3 percent but that pay growth — which would usually be expected to rise with so many people in work — remained much slower than inflation.
 
Sterling was slightly weaker after the data and British government bonds edged higher.
 
BANK OF ENGLAND‘S FOCUS ON PAY
 
Investors are watching the labour market data closely as a way to gauge when the Bank of England might raise interest rates again after making its first hike in borrowing costs in more than 10 years earlier this month.
 
Most of the BoE’s policymakers expect the steep fall in Britain’s unemployment rate will soon start to push up wages more strongly.
 
The ONS said workers’ total earnings, including bonuses, rose by an annual 2.2 percent in the three months to September. 
That was weaker than 2.3 percent in the three months to August but a touch stronger than a median forecast of 2.1 percent in a Reuters poll of economists.
Excluding bonuses, earnings rose by 2.2 percent year-on-year, the ONS said, in line with expectations.
Data published by the ONS on Tuesday showed British consumer price inflation stood at 3.0 percent in October, maintaining the squeeze on the spending power of households.
The steady loss of spending power for households is not just a problem for the BoE.
Prime Minister Theresa May has promised help for households and her chancellor, Philip Hammond, is under pressure to come up with further measures when he announces his budget plan on Nov. 22.
There was some encouraging news for Hammond in Wednesday’s figures from the ONS.
After falling for two quarters, output per hour — the main measure of productivity — jumped by 0.9 percent in the three months to September, the fastest quarter-on-quarter growth rate since 2011, the ONS said.
But in annual terms, output per hour was only 0.6 percent higher.
“The medium-term picture continues to be one of productivity growing but at a much slower rate than seen before the financial crisis,” the ONS’s head of productivity Philip Wales said.
Writing by William Schomberg; Editing by Catherine Evans
Our Standards:The Thomson Reuters Trust Principles

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