Unemployment in the UK falls to its lowest level since 1974

UK unemployment hit a new decade low in the three months to August as long-term illnesses kept more older workers out of the labor market, official data showed on Tuesday.

The Office for National Statistics said unemployment stood at 3.5 percent on a renewed surge in economic inactivity — 0.3 percentage points down from the quarter and the lowest since 1974.

However, the numbers also confirmed recent survey evidence that a sweltering labor market is beginning to cool as both employers and workers worry about the impact of sky-high inflation and rising borrowing costs.

Employment fell for the first time since the Covid-19 lockdown was suspended in the three months to August as the deteriorating economic outlook began to weigh on hiring numbers.

The employment rate was 75.5 percent, 0.3 percentage points lower than the previous quarter and a full percentage point lower than before the pandemic.

The ONS noted that this followed a quarter in which the employment rate was unusually high and inactivity was unusually low, suggesting that the underlying change in the economy may be more modest.

However, job vacancies fell for the third straight quarter — to the strongest reading since mid-2020 — although it remains near historic highs, with more vacancies than jobseekers.

The numbers gave little comfort to policymakers, who fear wage pressures will remain strong even as the economy slows because so many people have exited the labor market since the pandemic began.

The latest figures showed this trend not abating, with the inactivity rate rising 0.6 percentage points to 21.7 percent in the quarter, driven by long-term illnesses among older workers and students who were not working or looking for work.

Samuel Tombs of consultancy Pantheon Macroeconomics said the figures were confirmation that employment was “not in free fall” but also that wage growth was still too strong for the Bank of England to tolerate.

Real earnings fell near record levels as the surge in inflation weighed on household incomes. But the ONS said nominal wage growth outside of the Covid period, when the numbers were skewed, was the fastest on record. Average weekly earnings growth, including bonuses, accelerated to 6 percent – with even faster growth in the private sector and public sector workers lagging far behind – while regular earnings rose 5.4 percent.

British Chancellor Kwasi Kwarteng said the figures showed “the fundamentals of the UK economy remain robust and unemployment is at its lowest level in almost 50 years”.

https://www.ft.com/content/67c99847-e07a-4cc3-9a67-0d5d9d6575ce Unemployment in the UK falls to its lowest level since 1974

Adam Bradshaw

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