UK unemployment falls below two million, but economic recovery still shows signs of slowing
UK unemployment has fallen below two million for the first time in almost six years since 2008, official figures show. A drop, which was bigger than City analysts predicted, had taken the unemployment rate down to 6%.
The number of jobless people fell by 154,000 to 1.97 million over the quarter, the Office for National Statistics said.
The employment rate is now 73%, close to its all-time high of 73.2%, which was set in 2005.
However, the increase in employment over the three months marks the weakest quarterly gains since May last year, which many economists said suggested the economic recovery was slowing.
On Tuesday the ONS reported that inflation had fallen to 1.2pc in the year to September. The BoE is watching for signs of a pick-up in labour costs as it considers when to begin raising interest rates. Wednesday’s figures are unlikely to change the minds of the majority of its policymakers who have voted to keep rates unchanged, especially after a sharp slowing of British inflation in recent months. Jeremy Cook of currency firm World First, thinks however this will likely to set an interest rate rise before Christmas.
“The UK labour market remains strong. However, there are some areas of concern such as the slowest increase in employment for 15 months, which suggests that the pace of economic growth is easing,” said British Chambers of Commerce (BCC) chief economist David Kern.
Over the year to the end of May, the number of unemployed people fell by 538,000, the largest annual fall since records began.
But the number of people choosing not to seek work increased.
Those classed as economically inactive, such as students, long-term sick and those retiring early, increased by 113,000 in the quarter to more than nine million.
Wage growth also remained stubbornly below the current 1.2% rate of inflation.
Average weekly earnings in the June-to-August period, excluding bonuses, rose by 0.9% from a year earlier. Including bonuses, earnings rose by 0.7%.
“Real pay continues to drop, carrying on the trend that began six years ago. Weak pay is bad news for household budgets, but also for the levels of income tax receipts and the UK’s fiscal position,” said Martin Beck, senior economic advisor to the EY ITEM Club.
Shadow work and pensions secretary Rachel Reeves criticised the weak growth in wages. “Wages still well behind inflation. The pay squeeze on working people continues,” she tweeted.