UK unemployment rate ticks higher in August

The UK unemployment rate unexpectedly ticked higher in August as employment fell the most in four years, according to figures released by the Office for National Statistics on Tuesday.

In the three months to August, the number of people employed fell by 56,000 to 32.69 million, missing consensus expectations of a 26,000 increase and marking the worst decline since the spring of 2015. This pushed the unemployment rate up to 3.9% from 3.8% in July, which was the lowest rate since January 1975. Economists had been expecting the rate to remain unchanged.

The number of people unemployed rose 22,000 in the three months to August to just over 1.3 million, while the claimant count was up 21,100.

Total earnings growth including bonuses rose by 3.8% in the three months to August on an annual basis, down from revised 4% growth in the previous three-month period and undershooting expectations for an unchanged reading.

Excluding bonuses, average earnings were up 3.8%, down from 3.9% in the previous three-month period but above the 3.7% expected.

Matt Hughes, ONS deputy head of labour market statistics, said: "The employment rate is still rising year-on-year, but this growth has cooled noticeably in recent months. Among the under-25s, the employment rate has actually started to fall on the year.

"Pay growth continues to outstrip inflation, as it has done for over eighteen months now."

Thomas Pugh, UK economist at Capital Economics, said: "This is further evidence that the underlying weakness in economic growth is restraining labour market activity. However, it could also be evidence that the uncertainty around Brexit is starting to impact firms hiring decisions. The survey evidence is consistent with a further softening in employment and wage growth going forward too.

"That all said, the labour market remains the strongest part of the economy. Annual employment growth may no longer be rising, but is still around its long-run average of 1.0% and the unemployment rate remains at a joint 45-year low. So the labour market still looks set to provide solid support to the economy over the next few years."

Chris Williamson, chief business economist at IHS Markit, said: "The UK labour market showed signs of cooling in the summer, with employment falling to the greatest extent for four years. The updated official statistics corroborate earlier survey evidence which warned of a downturn in hiring resulting from the twin headwinds of heightened business uncertainty and slower economic growth.

"The disappointing numbers are not a blip but the consequence of a steady deteriorating trend seen over the course of 2019 so far. What’s more, the business surveys indicate that the job market continued to weaken in September, hinting that the rate of job losses likely accelerated. The CIPS PMI surveys showed headcounts being cut in September at the fastest rate since 2009. Recruitment industry survey data showed a similarly dark picture, with the number of people placed in permanent jobs falling for the seventh straight month in September. Any jobs growth seen during the month was accounted for by temporary and contract staff appointments, highlighting how business uncertainty has deterred companies from taking people on to their payrolls.

"However, recruiters also reported that the overall availability of suitable staff continued to deteriorate, meaning wage pressures remained elevated at the end of the third quarter, though have moderated considerably over the course of the past year. The surveys consequently suggest that the official pay growth rate could soften in coming months, easing closer to 3%.

"With the official labour market data and business survey in sync so far in the third quarter, the gloomy picture contrasts with the more positive-looking GDP numbers, and adds to concerns that a likely upturn in the third quarter will prove temporary, with the volatile GDP numbers masking an altogether more worrying picture of an economy struggling to grow."