Unemployment fell to 5.3%, its lowest level since 2008, but earnings growth was weaker. The Office for National Statistics said that the total earnings of workers (including bonuses) rose by 3% in the three months to September. This was behind expectations – a Reuters poll had forecast growth of 3.2%.
There was also a marked slowdown from August to September. In September, total wages rose 2%, slowing from 3.2% in August. This represented the weakest increase since February this year. Excluding bonuses, wages rose by 2.5%, just below the 2.8% recorded last month.
Port says: “The jobs market remains strong in the UK. The prevalence of part time or reduced hours work, the ready supply of unskilled and semi-skilled labor from the continent, and a still cautious business sector are all keeping a lid on wage pressure. That’s good news for Mark Carney, who is casting around for any excuse not to have to begin raising rates soon. But the tightness of the labor market makes higher wages inevitable over the next 6 months.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Unemployment now stands at its lowest level since before the ravages of the financial crisis, signalling an economy which has already done a great deal of healing. This picture looks even brighter when you consider we are now also seeing a significant rise in wages, which should be further boosted by the introduction of the national living wage next April.
“While inflation is close to zero this presents a conundrum for the Bank of England. On the one hand, the recovery in the labour market suggests interest rates should rise, on the other, Mark Carney is currently writing monthly letters to the Chancellor to explain why inflation is so far below target. The natural reaction to two such competing forces is maintenance of the status quo, which is why we shouldn’t pencil in a rise in interest rates for some time to come.”
