U.K. Wages Rise at Fastest Pace Since 2008, Employment Jumps

(Bloomberg) --

U.K. wages rose at their fastest pace in 11 years in the three months through June and employment climbed to a record high.

Basic earnings growth is now close to 4%, far above inflation and good news for consumers. The figures were bolstered by increases for National Health Service staff and a higher minimum wage introduced in April.

The headline figures point to ongoing strength in the labor market, with employment growth far outstripping economists’ forecasts. However, there were some signs of the Brexit jitters weighing on the wider economy, with vacancies falling to their lowest level since early 2018. Productivity also slumped from a year earlier, its fourth straight decline.

“This is far from a perfect jobs report. Employer caution is limiting the supply of new vacancies, yet stiff competition for recruits is still driving up wages,” said Pawel Adrjan, U.K. economist at the global job site Indeed. “Given the wider slowdown in the economy, the labor market is holding up surprisingly well,” he said.

For now, the stronger-than-forecast figures show the labor market remains tight, meaning the Bank of England is currently unlikely to join the global rate-cutting trend. It also means consumer spending may provide support to the economy, which shrank in the second quarter for the first time since 2012.

What Bloomberg’s Economists Say...

“The strength of today’s labor market data highlights why there is a high hurdle for the Bank of England to ease policy, especially while the nature of Brexit remains uncertain. Despite some evidence from the vacancies data that labor demand may be cooling, we expect the jobs market to remain tight, assuming a no-deal Brexit is avoided.”

-- Dan Hanson, Bloomberg Economics
Click here to read the full U.K. REACT

Average earnings excluding bonuses rose 3.9% from a year earlier, the most since the second quarter of 2008. Total earnings growth accelerated to 3.7%, also comfortably outpacing inflation. The number of people in work rose by 115,000.

Employment growth in the latest three months was driven by hiring, though self-employment made up almost 30% of the gain. Women accounted for three quarters of the total increase. There were also 99,000 more EU nationals working in the U.K. than a year earlier.

There was a slide in inactivity to a joint-record low as more people began looking for work. That left growth in jobs insufficient to absorb the increase in the active labor force, pushing up the unemployment rate for the first time in nine months. The lack of positions may reflect weaker demand for labor or firms finding it hard to find suitable candidates.

--With assistance from Mark Evans and Harumi Ichikura.

To contact the reporters on this story: Jill Ward in London at jward98@bloomberg.net;Lucy Meakin in London at lmeakin1@bloomberg.net

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

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