Wednesday 20 July 2016 11:22 am

Pound jumps as unemployment falls to 2005 low - but economists warn on Brexit effects

Finally, some relief for currency traders, after the pound jumped this morning on new figures showing unemployment has reached its lowest since 2005.

The Office for National Statistics (ONS) said the unemployment rate ell to 4.9 per cent in the three months between February and May this year, down from 5.6 per cent a year earlier. The last time it was this low was between July and September 2005.

That pushed the pound up 0.6 per cent against the dollar to $1.3188, while it rose 0.8 per cent against the euro, to €1.1984.

There were 1.65m unemployed people in the UK, the ONS added; 54,000 fewer than in the three months to February – and the lowest since 2008.

Employment rose to 74.4 per cent – the highest since records began in 1971.

Meanwhile, wage growth ticked up for the first time since February, with total pay including bonuses rising to 2.3 per cent – although regular pay, which excludes bonuses, fell for the first time since October last year, to 2.2 per cent. 

Average regular pay hit £471, up from £461 this time last year, while total pay hit £502, up from £492 this time last year.

However, economists have been cautious after the Brexit vote.

"In the post-referendum world, official UK statistics will be of limited use for a month or two, and today's Labour Market Statistics are no exception," said economists at Fathom Consulting.

"Latest readings suggest the labour market is in neutral gear, after a period of strong labour demand – we will receive more evidence at the end of this week when flash-PMIs are published for the first time.

"Our central view remains that the UK will narrowly avoid recession next year. But for this to happen, sterling needs to fall further to cushion the blow of weaker consumption and investment."