U.K. jobless rate remains unchanged at 4 pct, wage growth reaches post crisis high

In recent months, U.K. employment has stalled. The labor market data released today showed three-month growth in August at -5k three-month-on-three-month, representing the first negative reading since October last year. The unemployment level fell a bit too. However, with the labor force contracting, the jobless rate stayed unchanged at 4 percent still nevertheless the lowest level since mid-1970’s. The lack of progress in the labor market seems to be a sign that supply constraints are beginning to bite, especially given that demand continues to be firm, noted Daiwa Capital Market Research in a report.

The pay figures released today indicated to a tight labor market. Average weekly earnings growth rose 0.1 percentage points to 2.7 percent. However, excluding bonuses, growth came in above 3 percent 3M/Y for the first time since early 2009. On a shorter-term basis, the rate was more impressive. Total pay rose 3.9 percent, while regular wage growth surpassed 4 percent three-month-on-three-month.

The policymakers at the Bank of England will welcome these numbers. The policymakers had based their most recent decision to hike the interest rate on the assumption of strengthening domestically generated inflationary pressures.

However, in spite of higher nominal pay growth, wages in real terms continue to advance at a subdued rate, although the latest readings of 0.4 percent 3M/Y and 0.7 percent 3M/Y in real total and regular wages respectively represented the strongest growth in over 1.5 years, stated Daiwa Capital Market Research.

At 20:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at 19.8981, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -23.9517. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex