The UK’s booming labour market showed no sign of slowing in the three months to November, according to official data, with the strongest jobs growth in nearly a year pushing the employment rate to a new record.
The unemployment rate stayed at 3.8 per cent, its lowest since the 1970s, but the number of people in work rose by 208,000, the Office for National Statistics (ONS) said. This was the best growth since the three months to January 2019 and well above analysts’ expectations.
November’s data covers the month before Boris Johnson’s emphatic election victory in the middle of December, following which a number of surveys have shown a rise in consumer and business confidence.
Yet in November, the UK’s economy grew at its slowest pace in more than seven years, fuelling speculation that the Bank of England could cut interest rates when it meets at the end of this month.
Today’s data will make the task of the Bank’s monetary policy committee (MPC) more difficult. Its decision is likely to be strongly influenced by survey data over the next two weeks, which will indicate how the economy performed in December.
In the September to November period, the employment rate hit a record high of 76.3 per cent, up 0.5 percentage points on the previous quarter, the ONS said.
Traders reacted well to the data, pushing the pound up 0.3 per cent against the dollar to $1.304 by 10am.
Lower inflation keeps pay growth solid
Total earnings growth – which includes bonuses – rose at an annual rate of 3.2 per cent in the three months to November, the same as in the three months to October.
When bonuses were stripped out, pay growth slowed slightly to 3.4 per cent.
Yet the ONS’s David Freeman said: “While pay growth has eased since last summer, with inflation remaining subdued, earnings are continuing to increase in real terms.”
The ONS said the number of vacancies rose by 7,000 in the three months to December to 805,000, bucking the trend of falling openings over the last few quarters.
Tej Parikh, chief economist at the Institute of Directors, said: “The UK labour market remains in fine shape.”
“However, many positions remain unfilled, and as it becomes harder to find matches for particular roles, firms will increasingly look to close vacancies and tone down their hiring plans.”
Thomas Pugh, UK economist at consultancy Capital Economics, pointed out that the BoE has said it is currently focusing more than normal on the condition of the labour market.
“As such, the rebound in employment and slightly softer pay growth will give the MPC another reason not to cut rates from 0.75 per cent to 0.5 per cent.”
He added that the crucial piece of information for the Bank will be the survey data released on 24 January. Pugh said this “will confirm, or refute, any ‘Boris bounce’ in the economy”.