UK Jobless Rate Falls to 43-Year Low, but Pay Growth Weakens

LONDON—The UK’s unemployment rate fell to a 43-year low in the second quarter of 2018, but pay growth slowed to its weakest in nine months, official figures show.

The statistics, released by the Office of National Statistics on Aug. 14, showed there had also been the sharpest annual drop in the number of EU workers in Britain since 1997.

With Britain due to leave the European Union in March next year, the number of EU nationals working in the country declined by 86,000 compared to a year ago.

But high job vacancies have failed to translate into strong job growth. This is bad news for the Bank of England, which increased interest rates earlier this month.

“This will not be what the Bank of England will have wanted to see, as one of the justifications for [its] decision to hike rates earlier this month was that it was expecting wage growth to start lifting off. This hasn’t happened yet,” Emma-Lou Montgomery, an associate director at Fidelity International, said.

The unemployment rate falling to 4.0 percent in the April–June period, marks the lowest rate in the UK since February 1975, beating economists’ forecasts for it to hold steady at a previous low of 4.2 percent.

The figures showed that productivity also grew with the number of people whose main job was a zero-hours contract falling by the most since 2000.

“Overall the data could be described as mildly positive for the pound, and the currency quickly spiked up to its highest level of the day not long after the release,” said David Cheetham, chief market analyst at currency broker XTB.

“This seemed to be a bit of a knee-jerk reaction to the unemployment figures and the gains have been pared as traders digested the miss in wages.”

The increase in weekly earnings for UK workers in real terms (adjusted for price inflation), increased by 0.4 percent, excluding bonuses, or by 0.1 percent including bonuses, compared with a year earlier.

Reuters contributed to this report.