The UK unemployment rate fell to 4.3% in the three months to July, the lowest rate since 1975, official data from the Office for National Statistics (ONS) showed Wednesday. However, weak earnings growth of 2.1% over the same period, weighed on the British pound.
The unemployment rate has been falling pretty steadily for over a year now. It was 4.4% in the three months to June and 4.9% a year earlier.
The figures also showed a fresh record high number of people in work. The employment rate rose further to 75.3%, with some 32.14 million people in employment in the UK between May and June 2017.
While the numbers on how many Britons are working were positive, the earnings data was less upbeat. The regular average earnings growth measure – which excludes bonus payments – was 2.1% in the three months to July. That was unchanged from the three months to June and compares with 2.2% a year earlier.
That’s not great news for the economy as it means in real-terms – or when compared with the cost of living which is rising at close to 3% – earnings are actually falling. This adds to the complexities facing the Bank of England’s (BOE) Monetary Policy Committee (MPC).
The next interest rate announcement is due Thursday and expectations are that rates will remain on hold. That’s despite a jump in the pound Tuesday, on the higher than expected inflation rate.
“Lagging wages makes it more likely the Bank of England will look through rising inflation when it decides on interest rates this week,” said Fidelity International’s Ed Monk. “Prices are rising above target, which creates the case for raising rates, but today’s wage data suggests all is still not right in the economy.”
It appears the markets agree with that sentiment, as the British pound sank below $1.33 versus the dollar in the wake of the disappointing earnings data.