UK sees employment fall but wages defy Brexit shock

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Workers cross Westminster Bridge during the morning rush hour in London in Britain, November 28, 2016. REUTERS/Toby Melville

The number of people in work in Britain fell for first time in more than a year in the three months to October, official data showed on Wednesday, suggesting a slowing in the labour market after the Brexit vote.

Britain’s unemployment rate stayed at 4.8 percent – in line with a forecast by economists in a Reuters poll – and basic pay rose at its strongest pace since the summer of 2015.

But the number of people in work fell by 6,000, the first decline since the second quarter of last year, the Office for National Statistics said.

“The labour market appears to have flattened off in recent months. While the employment rate remains high, it is slightly down on the record set recently,” ONS statistician David Freeman said.

The number of people out of work also fell, by 16,000, as fewer people sought work.

Britain’s economy has largely weathered the initial shock of the referendum decision to leave the European Union.

Several companies, such as technology giants Facebook and Google, have announced plans to create jobs in Britain in recent weeks, adding to a sense of business-as-normal despite the vote.

However, the unemployment rate is widely expected to rise next year as companies hold off from hiring as they wait for more clarity on the country’s future ties to the EU, which could take years to be negotiated.

The Bank of England expects the jobless rate to stand at 5.6 percent in two years’ time.

The ONS said the number of unemployment benefit claimants – which is considered to be a potential early warning sign of an economic downturn – rose by 2,400 in November and by 13,300 in October, more than previously though.

Economists had expected the number of benefit claimants to rise by 5,500 in November.

Wages in the August-October period showed solid gains, possibly reflecting pressure on employers to hold on staff and attract new hires as the labour market approaches capacity.

The ONS said workers’ total earnings including bonuses rose by an annual 2.5 percent, compared with 2.4 percent in the three months to September and the joint strongest rate in more than a year.

Economists taking part in a Reuters poll had expected wage growth of 2.3 percent.

Excluding bonuses, earnings rose by 2.6 percent year-on-year against expectations for a 2.5 percent rise. It was the strongest increase since the three months to August 2015.

A report published last week by a British recruitment industry body showed the starting salaries for permanent workers hired via agencies rose at their fastest rate in six months.

However, wages are not expected to keep pace with inflation in 2017, calling into question whether consumers will be able to continue driving Britain’s economy with their spending.

Inflation rose to 1.2 percent in November, its highest level in more than two years, and is expected to climb sharply toward 3 percent by the end of next year, reflecting the sharp fall in the value of the pound since the Brexit vote.

(Reporting by William Schomberg and David Milliken)

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