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UK unemployment rate at 10-year low; earnings slow down

January 22
2:05 AM 2016

The unemployment rate in the UK fell to the lowest in more than a decade, while wage growth rate is slowing down. The jobless rate for the quarter ending November 2015 was at 5.1 percent. The wage growth was also below the expectations. The employment rate hit 74 percent highest since 1971.

The 5.1 percent unemployment rate for the quarter ended November 2015 was lowest since October 2005, as per the data from Office for National Statistics (ONS). The number of people without job dropped by 99,000 to 1.68 million for the quarter under study. 

BBC reports that average weekly wages rose two percent. This included bonuses as well. However, the rate of increase is the slowest since February 2015. Wage growth was also below the forecast of 2.1 percent growth rate, predicted by Reuters survey.

Without the inclusion of bonuses, the average weekly wage growth was 1.9 percent for the quarter. The Office for National Statistics further stated that the employment rate reached 74 percent, highest since comparable records started in 1971. 

The ONS released the latest data a day after the statement by Mark Carney, Governor, Bank of England, ruling out that early rise in interest rates amid turmoil in the global economy. Adding to this, the growth rate in the UK economy is also slowing down.  

The jobless rate dropped from 5.2 percent to 5.1 percent for the quarter ended November 2015. The latest numbers show how much the labor market has healed since the recession. The jobless rate was at 8.5 percent in 2011. Now, it's much better, as reported by Financial Times.

However, the sustained wage growth would be one of the factors that would be considered by the central bank if it wants to raise interest rates. Carney also said he wants earnings growth above three percent before a decision on rate hike is taken. 

Ruth Miller, an economist at Capital Economics, said: "The figures confirmed an interest rate hike is still some way off." Economists opine that the wage growth was not much slowed down as it was feared. Research team at TDS has stated that UK labor report was fairly decent as the unemployment rate fell to the lowest since 2005, according to FX Street.

The jobless rate is below the pre-crisis average of 5.2 percent. It has not triggered any pay growth, opines Martin Beck, senior economic advisor to the EY ITEM Club, the forecasting body of accountancy firm EY.
Martin Beck further said: "The latest pay numbers will exacerbate concerns raised in recent MPC meetings that very low inflation may be pushing down pay settlements, threatening a negative feedback between wages and prices. That the first post-crisis rate hike may be pushed back into 2017 is looking an ever-more realistic possibility."

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