Jobs market holds up as experts await Brexit hit

Jake Cordell
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Economists warned before the referendum Brexit would lead to higher unemployment (Source: Getty)

The UK labour market is holding up well in the face of the shock vote to leave the EU, though experts say it is just a matter of time before wages come under pressure and jobs stutter.

Employment and pay growth managed to beat expectations in figures published by the Office for National Statistics (ONS) this morning, although the number of people out of work crept up and there were other early signs of simmering uncertainty.

In the three months to August, the number of unemployed rose by 10,000 the ONS said this morning. However, more than 100,000 jobs were also created, helping the unemployment rate to hold steady at 4.9 per cent. That was in line with the consensus expectations, although some had pencilled in a dip to 4.8 per cent.

Early figures on the number of people claiming out-of-work benefits in September also showed the dole queue only grew by 700, compared to estimates for a rise in the claimant count of 3,000.

Pay packets grew by 2.3 per cent in the year to August, the ONS said, ahead of predictions for growth of just 2.1 per cent. However, with inflation running at 0.6 per cent over the same period, real wage growth hit its weakest level since the end of 2015.

The pound rallied by half a cent against the dollar on the news, to climb back above $1.23, while sterling also jumped against the euro to stand up for the day at €1.1208. It quickly faded, however, as analysts began to pore through the details.

Coupled with yesterday's inflation figures, which showed prices rising at one per cent, economists have doubled down on their analysis that while the economy is holding up at the moment, the fallout from the surprise 23 June vote could be just around the corner.

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Adam Chester, head of economist at Lloyds said: “Today’s labour market report continues to suggest the economy is holding up well.

"It remains to be seen how long these favourable trends can be sustained. The labour market is widely recognised to respond with a lag to movements in the economy. Given the uncertainty surrounding the economic outlook, there is a clear risk that hiring plans may slow, or go into reverse, over the coming year."

PwC's chief economist John Hawksworth added: "There is no sign yet of major detrimental effects from the Brexit vote ... But it will take time for companies to adjust their hiring plans to the Brexit vote, so we could see some further slowdown in jobs growth over the next year."

The Centre for Economics and Business Research (CEBR) also noted that while employment rose, the total number of hours worked dipped, in a sign that the economy could be losing steam as demand for staff slips back.

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