UK employment falls as firms are leery of hiring ahead of Brexit

London — Britain’s jobs boom weakened in the three months to August as the approach of Brexit led to the biggest fall in employment in more than four years, data showed on Tuesday.

The number of people in employment unexpectedly fell by 56,000 to 32.69-million, the UK office for national statistics (ONS) said. Economists polled by Reuters had expected employment to grow by 23,000.

The number of people out of work rose by 22,000 to just more than 1.31-million. The ONS also said total earnings growth, including bonuses, rose by an annual 3.8% in the three months to August, slowing from a rise of 3.9% in the three months to July, which was the strongest increase since 2008.

The rise in total pay in the June-August period was weaker than the median forecast of 4.0% in the Reuters poll. Excluding bonuses, which smooths out some volatility, pay growth slowed slightly to 3.8%, a touch ahead of the Reuters poll forecast of 3.7%.

“The employment rate is still rising year-on-year, but this growth has cooled noticeably in recent months,” ONS statistician Matt Hughes said. “Among the under-25s, the employment rate has actually started to fall on the year.”

Britain’s economy contracted in the second quarter but appears to have grown between July and September, avoiding a recession before the country’s scheduled departure from the EU at the end of this month. The labour market has proven surprisingly strong since the Brexit referendum in June 2016, something many economists attribute, in part, to employers hiring workers that they can later lay off rather than making longer-term commitments to investment.

The unemployment rate unexpectedly rose slightly to 3.9% from 3.8%, which was its lowest since the three months to January 1975, the ONS said. However, some surveys of companies have suggested employers are turning more cautious about hiring as Britain approaches its new Brexit deadline of October 31.

The ONS said vacancies fell again to 813,000, touching their lowest level since the three months to November 2017.

The trend in pay growth is being watched closely by the Bank of England (BOE). Deputy governor Dave Ramsden said in a newspaper interview published on Sunday that company wage costs are “picking up quite significantly, which will drive domestic inflationary pressure”.

However, the BOE is widely expected to wait for more clarity on Brexit — which it fears could damage Britain’s economy if there is no deal with Brussels to ease the transition — before any decision to resume its gradual and limited programme of interest rates hikes.

Reuters