UK unemployment rate hits historic low but wage growth remains subdued

Britain's unemployment rate hit a new low in the quarter to July 2017, while wages increased less than expected as they continue to lag behind inflation, new figures have shown.

The jobless rate fell by 75,000 from the previous quarter to 1.46 million in the three months to July, according to the Office for National Statistics (ONS), while the unemployment rate fell to 4.3%, down from 4.4% recorded in the previous month, which was the lowest on record since 1975.

There was negative news on the wage front, however, as average weekly earnings rose by 2.1% year-on-year, in line with the gain recorded in the previous month but below the 2.2% increase analysts expected.

When the impact of inflation is factored in, real weekly wages fell by 0.4%, both including and excluding bonuses, compared with a year earlier.

Economists have previously warned the squeeze on households was being exacerbated by subdued wage growth and data released yesterday showed inflation jumped to the joint-highest figure in four years in August, climbing to 2.9%.

The UK wage growth data was as bad as it can get," said Naeem Aslam, chief market analyst at Think Markets UK.

"Traders have decided to shave their profit which is the most sensible trade because the Bank of England will only choke the consumer if they increase the interest rate by looking at the inflation.

"How much you really want to squeeze the consumer, inflation is high and if you increase the interest rate, it would only create a negative effect."

Ian Stewart, chief economist at Deloitte, described job creation as a "huge UK success story", despite Brexit uncertainties and slower growth.

"The UK continues to generate ever lower unemployment and ever more jobs," he said.

"But the recession, and its aftermath, has weakened the link between unemployment and wages. In the past this degree of tightness in the jobs market would be pushing wages higher. Instead earnings growth has flat lined in the last couple of years."

Meanwhile, the number of employed workers rose more than expected, climbing by 181,000 to 32.1 million in the quarter to July, compared to the previous three months. The figure was 379,000 higher than in the corresponding period last year and higher than analysts' expectations for an 154,000 gain.

The ONS added that the employment rate – the proportion of people aged from 16 to 64 who were in work – was 75.3%, the highest since comparable records began in 1971.

Damian Hinds, the Minister for Employment, said the latest figures underlined the resilience of the UK economy but he admitted there was more work to be done.

"Britain's employment success is largely about a growth in full-time and permanent work, as employers invest in Britain and offer quality job opportunities that put more money into people's pockets," he said.

"But there is more to do, and we will continue to build on our achievements through our employment programmes."