UK economy produces still more jobs, higher wages

The UK's employment rate has reached a new high while employees' wages are rising at the fastest rate in 11 years, according to official figures released this week.

Panorama of workers walking in London
The Office for National Statistics (ONS) reported the number in work increased by 31,000 in the quarter July to 32.78 million while the number out of work dropped by 11,000 to 1.29 million, representing the lowest unemployment rate for 45 years.Nevertheless, business leaders and economists expressed concerns that the jobs boom might be cooling under the ever-lengthening shadow of Brexit.

UK employment among women reaches new high - largely due to increase in pension age

David Freeman, head of labour market statistics at the ONS, said, "The employment rate has remained fairly constant at a joint record high for some months now, while the unemployment rate was last lower at the end of 1974."Vacancies continue to fall back from recent record highs, with much of this decline coming from small businesses."Including bonuses, wages are now growing at 4% a year in cash terms for the first time since 2008. Once adjusted for inflation, they have now gone above 2% for the first time in nearly four years."The figures showed that employment among women reached a new high, though this was mainly due to the government increasing the female pensionable age from 60 to 65.

UK employment minister: wages are consistently rising faster than inflation

Employment Minister Mims Davies welcomed the data, saying, "Wages are consistently rising faster than inflation – now for over a year-and-a-half – meaning we’re seeing a sustained boost in pay, supporting consumer confidence and giving a vital lift to millions of households who gain from greater financial security."This joint record employment rate and decades-low unemployment shows our labour market is booming. It’s especially pleasing to see continued record female employment at 72.1%, signalling the great strides we’ve made in empowering women in the workplace, whatever their background."There is still more to do. But today’s positive figures again show a thriving, diverse and resilient labour market to be proud of, and we are in great shape for Brexit on October 31."

Institute of Directors: fears that UK jobs market could be cooling

However, Tej Parikh, chief economist at the Institute of Directors, said he feared the UK’s jobs market could be cooling, mainly because of Brexit uncertainties."For a long time, businesses have been eager to expand their workforce despite difficult economic conditions. With the supply of available workers shrinking and uncertainty lingering, firms are now beginning to dial down their recruitment ambitions," he said."Vacancies are likely to continue falling. It’s becoming harder for business leaders to do any meaningful workforce planning, let alone find the talent that they need. High costs and an unclear view of future revenue have also led some to hold off on new hires."Meanwhile, though the ongoing strength in pay packets is a plus for workers, wages may be pushing at their limit. Cash-strapped SMEs in particular are already finding it difficult to compete for talent by upping their salary offers."

CIPD: strong pay growth driven by labour shortages

Jon Boys, economist at the Chartered Institute of Personnel and Development (CIPD), said, "It’s good news all round with pay continuing to grow and employment remaining at a record high. Although just shy of the pre-crash peak, pay continues to outstrip inflation putting more money in people’s pockets.“However, this strong pay growth is largely being driven by labour shortages in sectors like construction. For this to continue in the long-term, businesses must improve their productivity. It’s also essential that they look at how they recruit, manage and develop their workforce given our uncertain political climate right now."

Pantheon Macroeconomics: surveys now point to negligible growth in employee numbers

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, added, "The renewed fall in the unemployment rate distracts from an otherwise troubling labour market report. Employment was only 31K — 0.1% - higher in the three months to July than in the previous three months, well below the 89K average increase seen since the Brexit vote in 2016."Most surveys of employment intentions also have deteriorated over the summer and now point to negligible growth in employee numbers. Britain’s so-called 'jobs miracle' is starting to lose its shine."

EY Item Club: much will depend on what happens with Brexit and how the UK economy reacts

Howard Archer, chief economic adviser at the EY Item Club, also believes the jobs market will continue to cool, with the likely effect of dampening wage growth."The suspicion has to be that the labour market will falter further in the near term at least as companies worry about the very real possibility of a no-deal Brexit at the end of October, an unsettled domestic political environment and a challenging global economy," he said."August’s further drop in vacancies fuels this suspicion. Much will obviously depends on what happens with Brexit on October 31 and how the economy reacts."We are also doubtful that earnings growth can make further gains – and it may well ease back from July’s levels. With employment growth likely to slow and companies cautious over the outlook among major uncertainties, there is survey evidence that pay awards may be levelling off."

PwC: why the UK should avoid a technical recession

However, PwC economist Jing Teow said continued jobs growth, together with the stronger-than-expected growth figures for July released on Monday, "reinforces our view that the UK should avoid a technical recession in the third quarter".

For more news and views on UK issues, visit our dedicated UK section. 

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