U.K. Job Market Weakens as Election Battle Heats Up

(Bloomberg) -- The U.K. economy lost jobs in the third quarter and vacancies posted their largest annual decline since the financial crisis, just as the country faces a snap general election.

The figures from the Office for National Statistics provide further evidence that Brexit uncertainty is finally hitting the labor market, which has defied the wider economic troubles since the 2016 vote to leave the European Union and supported consumer spending.

The data, which also show wage growth unexpectedly slowing, add to the fierce debate over the economy as the campaign for the Dec. 12 vote intensifies.

Prime Minister Boris Johnson will point to near-record employment, with around 3 million jobs created since the Conservatives took office in 2010. Labour will highlight the cost of austerity and mounting signs of weakness after figures Monday showed the slowest economic growth in almost a decade.

The Resolution Foundation, a research group, said in a report Tuesday that the big increase in employment since 2010 reflects households, particularly women, being forced to work more because of the unprecedented squeeze on incomes since the financial crisis.

Though wages are growing at 3.6%, double the rate of inflation, real earnings are no higher than they were before the crisis levels and pay growth could slow further if the economy weakens.

Signs that the labor market is turning was cited by two Bank of England policy makers as a reason for wanting to cut interest rates this month.

The number of people in work fell by 58,000 between July and September, the biggest drop since 2015, with employees, part-time workers and young people bearing the brunt. Female employment dropped by 93,000, a worrying sign as women have driven the recent jobs boom.

Advertised vacancies, seen as a leading indicator of unemployment, fell further between August and October, leaving them 53,000 lower than a year earlier -- the biggest decline since 2009. The number of job openings stood at the lowest for two years.

What Our Economists Say:

“A further signal of stuttering labor demand came from the vacancies data which fell again, suggesting a rise in the unemployment rate further ahead. The slowdown in job creation and measures of labor demand appear to reflect the weaker economic backdrop. Looking through the recent volatility in GDP figures, we think output is probably rising 0.2% a quarter. That’s half the average since the referendum.”
--Dan Hanson, Bloomberg Economics. For the full report, click here.

A rise in economic inactivity meant that unemployment fell in the third quarter, cutting the jobless rate to 3.8% to match the lowest since the mid-1970s. However, there was a rise in short-term unemployment, which has been mentioned as a concern by some BOE policy makers.

Other figures show that output per hour was unchanged in the third quarter compared with a year earlier. Productivity has failed to grow for five straight quarters, the longest stretch since 2009.

Employment of EU nationals grew just 0.3% from a year earlier, suggesting Brexit is deterring foreign workers. The figure fell by 130,000, or more than 5%, from the second quarter, though short-term comparisons tend to be volatile.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

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

©2019 Bloomberg L.P.