Britain's labor market outperformed tepid growth in the rest of the economy in the second quarter as the unemployment rate unexpectedly fell to its lowest since 1975, official data showed on Wednesday.
Sterling jumped nearly half a cent against the U.S. dollar and British government bond prices slid after the jobless rate edged down to 4.4% in the three months to June, against expectations for it to hold at 4.5% in a Reuters poll of economists.
Figures on wage growth also came in better than expected but they were flattered by bonus payments in the financial sector. The underlying picture still showed households feeling the strain of rising prices since last year's Brexit vote.
Inflation has eased slightly since May when it hit an almost four-year high of 2.9%, but prices are still rising faster than wages. The Office for National Statistics said workers' total earnings including bonuses rose by an annual 2.1% in the three months to June, compared with 1.9% in the period to May, boosted by a 27% surge in bonus payments in the financial sector.
Economists taking part in a Reuters poll had expected wage growth of 1.8%. Overall wage growth in real terms fell by 0.5%, the same as in the three months to May and one of the steepest declines in the past three years. Excluding bonuses - which analysts say gives a better picture of the underlying trend - earnings in nominal terms rose by 2.1% year-on-year, the fastest rate since January and beating expectations for a 2.0% rise.
The Bank of England is watching wage growth closely as it gauges whether the increase in inflation is creating longer-lasting pressure on prices. It expects wages to rise by 2% this year before picking up in 2018 and 2019.
Separate ONS figures showed productivity - perhaps Britain's biggest economic weak point since the financial crisis - fell by 0.1% in output-per-hours terms during the second quarter compared with the first quarter, when it fell 0.5%.
The labor market data suggested no sign of a drop in foreign workers since last year's Brexit vote. Non-British born people working totalled 5.68 million people in the second quarter, up 262,000 from a year ago. (Reuters)
Source: www.businessworld.ie
