UK unemployment unexpectedly falls to a seven-year low while wage growth misses economists' expectations

 
Jessica Morris
Follow Jessica
Yep. Lots of people have jobs now (Source: Getty)

UK unemployment unexpectedly slipped to its lowest level since mid-2008, according to data released today by the Office for National Statistics (ONS).

The number of people out of work fell by 79,000 to 1.77m, taking the unemployment rate to 5.4 per cent between June and August, down from 5.6 per cent in the three months to May.

Sterling rose against the dollar to $1.5366, leaving it up 0.8 percent on the day.

"Today's fall in unemployment has more than outstripped the recent rises leaving unemployment at its lowest level since mid 2008," Nick Palmer, an ONS statistician, said.

The number of people in work also rose to 140,000, lifting the employment rate to 73.6 percent, the highest since comparable records began in 1971.

Read more: Pound tumbles as UK slips back into negative inflation

Average annual wages, including bonuses, increased by three per cent in the quarter to August, down from 2.9 per cent in the three months to July, and missing economists' expectations for a 3.1 per cent rise. Pay, excluding bonuses, rose 2.8 per cent, also easing back from 2.9 per cent in July.

Workers would've enjoyed even bigger wage increases as inflation has hovered around zero for most of the year. Yesterday, the consumer price index turned negative for the second time since 1960, according to comparable data.

Bank of England (BoE) policymakers have said wage growth and unemployment will be a key metric for when it eventually decides to hike interest rates, however economists said today's slower earnings growth adds weight to the argument that rate-setters will push back a hike.

"The slowdown in earnings growth in August itself, coupled with deflation of 0.1 per cent in September and evidence that the economy hit a soft patch during the third quarter, will likely reinforce market belief that the Bank of England will not be raising interest rates before late-2016 and could even delay acting until 2017," Howard Archer, chief economist at IHS said.

Related articles