UK unemployment rate holds at historic low but number in work falls for the first time since 2016

Britain's unemployment rate remained at a 42-year low in the quarter to September, but the number of people in work fell for the first time in a year, new figures have shown.

The number of jobless people fell by 59,000 from the previous quarter to 1.44 million in the three months to August, according to the Office for National Statistics (ONS). Unemployment was unchanged from the 4.3% recorded in the previous month, which was the lowest on record since 1975.

Meanwhile, the number of employed workers fell for the first time since October last year, dropping by 14,000 to 32.06 million in the quarter to September, compared to the previous three months.

The figure was 279,000 higher than in the corresponding period last year but lower than analysts' expectations for a 50,000 gain and marked the biggest decline since June 2015.

"The strength of the economy is driving an increase in full-time, permanent jobs and a near-record number of people are now in work thanks to the Government's welfare reforms," said the Minister for Employment, Damian Hinds.

"When unemployment fell to 5% early last year, many people thought it couldn't get much lower, and yet it now stands at 4.3%."

Average weekly earnings rose by 2.2% year-on-year, slightly above the 2.1% figure analysts expected, while the previous month's 2.2% gain was revised up to 2.3%.

When excluding bonuses, earnings grew 2.2%, in line with the previous month's figure and marginally above the 2.1% forecast. However, when the impact of inflation is factored in, real weekly wages fell by 0.4%, when including bonuses and by 0.5% when 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 remained at the highest level since April 2012.

"The big question for economists is when the tightness we are seeing in the labour market will eventually feed through to higher wages," said Ben Brettell, senior economist at Hargreaves Lansdown.

"The Bank of England says this should happen next year, but I don't think it's a given.

"In theory, with unemployment so low, sooner or later demand for labour will outstrip supply and workers will be able to demand higher wages. But it looks like something fundamental has changed in the labour market, allowing wages to remain depressed despite low unemployment."

Andrew Wishart, UK economist at Capital Economics, added: "We still expect a pick-up in wage growth ahead, in line with the REC permanent salaries survey and BoE agent's reports of increasing difficulty hiring."

The ONS added that the employment rate – the proportion of people aged from 16 to 64 who were in work – stood at 75.0%, up from 74.4% in the corresponding period a year ago and just below the 75.1% recorded a month ago.