U.K. employment level drops in three month to August, jobless rate rises to 3.9 pct

The U.K. labor market data released today gave further evidence that the ongoing uncertainty around the U.K.’s withdrawal from the EU, along with signs of a slowdown in world economy, were impacting on hiring activity in the U.K. The level of employment dropped by 56k in the three months to August, as compared with market expectations of a slight rise of 26k; however, in keeping with the wide deceleration seen in hiring activity in recent months.

On the latter, this trend continued in the latest report with the number of vacancies falling to a two-year low. Unsurprisingly, the fall in employment signified that unemployment also rose, rising, 22k and bringing the jobless rate back up to 3.9 percent.

The fall in employment contrasts slightly with the stronger trends seen in official measures of U.K. economic activity, said Lloyds Bank in a research report. The U.K. economy continues to display resilience in the face of ongoing uncertainty over the longer-term outlook.

Therefore, it is more likely that the moderation in labor market activity reflects firms taking a more cautious approach to hiring in the current environment rather than activity looking to reduce their headcount. The services PMI index showed that the fall in jobs at service sector firms was mostly linked to “the non-replacement of leavers as opposed to compulsory redundancies”.

Therefore, the prospects of the U.K. labor continue to hinge on the outcome of the Brexit negotiations, with an orderly outcome likely to see the labor market regain some momentum, said Lloyds Bank.

However, the rate of pay growth eased in the latest report with both headline and regular rates of pay growth easing to 3.8 percent three month/year from 3.9 percent previously.