Britain’s unemployment rate falls to 5.3%

Britain’s unemployment rate fell to its lowest level since early 2008 but earnings grew more slowly than expected, showing why the Bank of England is in no hurry to raise interest rates.

Britain’s unemployment rate dipped to 5.3% in the third quarter, its lowest level since the three months to April 2008, before the financial crisis hammered the economy.

The UK rate compares with a 9.3% jobless rate here, which Taoiseach Enda Kenny has described as still too high. It is down from a peak of over 15% in early 2012.

The British unemployment rate, which rose as high as 8.5% in 2011, has plunged over the past couple of years and in 2015 it has again fallen faster than the BoE expected.

But wage growth has not risen as strongly as the Bank projected.

Last week the BoE said Britain’s near-zero inflation rate would only pick up slowly even if interest rates stayed on hold throughout next year.

Sterling fell after yesterday’s data release as investors bet it would keep the pressure off the BoE to raise rates, even as the US Federal Reserve heads for a hike possibly as soon as next month.

Economists were broadly upbeat about the data and some expected wage growth to pick up given the strength of the labour market.

“We think the weaker-than-expected earnings growth will prove very temporary; indeed, a range of measures confirm that the labour market is tightening and that will drive wage growth higher,” said Daniel Vernazza, UK economist at UniCredit.

The UK said the total earnings of workers, including bonuses, rose 3% in the three months to September, unchanged from the three months to August but below a 3.2% forecast in a Reuters poll.

In the month of September alone, total wages rose by 2%, a sharp slowdown from 3.2% in August and the weakest increase since February.

Excluding bonuses, average weekly earnings growth slowed noticeably to 2.5% in the third quarter and 1.9% in the month of September alone, both the weakest readings since the first quarter of 2015.

The BoE has said it is keeping a close eye on wage growth as it mulls its first rate hike since 2007.

Strong US jobs numbers last week bolstered expectations that the Federal Reserve will raise interest rates in December.

The UK said the number of people in employment rose by 177,000 in the third quarter, taking the employment rate to 73.7%, the highest since records began in 1971.