UK Wage Growth Strongest Since Global Crisis; Employment At Record High
UK wages grew at the fastest pace since the 2008-09 global financial crisis and employment reached a record high in the second quarter, despite contraction in the economy, data from the Office for National Statistics revealed Tuesday.
Total average weekly pay grew 3.7 percent in the year to June to GBP 538. This was the strongest growth rate seen since June 2008 and was in line with expectations.
Excluding bonus, average pay climbed 3.9 percent, also the fastest since June 2008, and exceeded the forecast of 3.8 percent.
Wage growth data suggests that it may be too early to be talking about Bank of England rate cuts, although as ever, it all depends on Brexit, James Smith, an ING economist, said.
In the three months to June, employment increased by 115,000 to reach a record 32.81 million. The ONS said employment has been on an upward trend since 2011. The employment rate remained unchanged at 76.1 percent.
The jobless rate increased by 0.1 percentage points on the quarter to 3.9 percent in the three months to June. Economists had forecast the rate to remain unchanged at a 44-year low of 3.8 percent. The number of people out of work rose by 31,000 to 1.33 million.
In July, the claimant count rate held steady at 3.2 percent. The number of people claiming jobseekers’ allowance increased by 28,000 from June.
Another report from ONS showed that output per hour, the main measure of labor productivity, fell 0.6 percent from last year. Output per worker also dropped 0.1 percent annually.
Andrew Wishart, an economist at Capital Economics, said as output per hour fell for a fourth consecutive quarter, higher wage growth should push up unit labor costs and inflation even as it supports consumer spending.
As a result, if a no-deal Brexit is avoided, the economist still expects interest rates to rise next year. However, a hit to demand from a no-deal Brexit would cause the labor market to soften, justifying interest rate cuts, Wishart noted.
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