LONDON (AP) — Wages in Britain are rising at their fastest rate since the global financial crisis over a decade ago as the number of people in work hit a record high despite Brexit headwinds, official figures showed yesterday.
Average weekly earnings were 3.9 per cent higher during the three months to June against the same period a year before, the Office for National Statistics said. That was 0.1 percentage point higher than the first-quarter figure and is the highest rate in 11 years.
The number of people in work rose by an annual 425,000 to the record 32.81 million. Overall, the proportion of people in work stood at a joint-highest level of 76.1 per cent.
The increase in employment levels came despite a modest uptick in the proportion of those out of work, to 3.9 per cent from 3.8 per cent in the previous quarter. Still, that’s a historically low rate.
“The record amount of people in employment is a huge positive for the economy and certainly something to shout about, especially in such a time of political uncertainty,” said founder and CEO of employment website CV-Library Lee Biggins.
“However, our own data has suggested that while applications for new jobs are up year-on-year, since June, application growth has increased by a minimal 0.3 per cent, despite there being a 13.3 per cent increase in job vacancies on offer.”
There have been many potentially meaningful changes since June. Boris Johnson has replaced Theresa May as prime minister and he has insisted the country will leave the European Union (EU) on October 31 as scheduled.
That’s raised fears, particularly in financial markets, where the pound has fallen to two-and-a-half-year lows against the dollar, that the country may crash out of the EU without a deal. Many economists think that will lead to a recession as tariffs and other distortions to trade hit British exports.
However Brexit plays out, analysts said Tuesday’s figures undermine the case for a rate cut from the Bank of England as higher wages can boost inflation, which could already be trending higher as the lower pound raises import costs.
Speculation has increased that the bank may cut its main rate from 0.75 per cent in light of Brexit uncertainties. Last week, official figures showed the British economy shrank by 0.2 per cent in the second quarter largely because of Brexit-related issues.
“Stronger wage growth backdrop suggests that policy easing is unlikely in the near-term,” said economist at ING bank James Smith.
“A lot depends on Brexit of course, but for the time being, we think markets may be slightly overestimating the chances of Bank of England easing — investors are now pricing in a rate cut by early 2020.”