U.K. Labor Market Remains Strong But Signs of Stress Appear

(Bloomberg) -- The U.K. economy continued to create jobs over the summer and wages jumped, despite the escalating turmoil over Brexit.

The number of people in work rose by 31,000 in the three months through July, returning the jobless rate to 3.8%, its lowest since the 1970s, the Office for National Statistics said Tuesday.

A tight labor market is forcing employers to increase salaries, and basic pay rose a faster-than-expected 3.8% in the latest three months. That’s well above inflation, helping to underpin consumer spending.

There were nonetheless some signs that the jobs market is succumbing to the jitters weighing on the wider economy. Employment growth was weaker than forecast; vacancies fell to their lowest level since 2017; and the number of hours worked fell sharply.

Key Insights

• Average earnings growth slowed from 3.9% in the three months through June but the figures are being affected by the timing of pay increases in the state-funded National Health Service
• Wage growth including bonuses accelerated to 4%, the highest since 2008, with pay in July alone jumping 4.2%. Pay growth was strongest in construction and financial services
• The employment rate stood at a record 76.1%. Job creation was driven by people working for themselves. Inactivity was little changed
• Employment growth has slowed this year, and the increase in the latest three months was less than the 55,000 forecast by economists
• Vacancies fell to 812,000 in the three months through August, the lowest since September-November 2017. The number of hours worked dropped by 4.3%
• Pay increases are not being matched by productivity gains, putting pressure on companies to raise prices to protect their margins

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson

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