UK employment data was mixed today as the unemployment rate unexpectedly fell but average earnings disappointed. The ILO measure of unemployment dropped to a 7-year low of 5.4% in August from 5.5% the prior month. Analysts had forecast for the unemployment rate to stay unchanged at 5.5%. However, the jobless claims count, which is one month ahead of the ILO measure, rose by 4,600 in September against estimates of a rise of 1,000.
Total employment in the economy continued to rise, with the employment rate reaching a record high of 73.6% in the three months to August. This was up 0.2% from the previous three months with 140,000 more people in employment.
The tightening labor market has yet to have a significant impact on wages though as average weekly earnings came in below estimates, easing concerns about rising pay inflation in the UK economy. The 3-month average weekly earnings figure rose to 3.0% in August from 2.9%, against expectations of 3.1%. Excluding bonuses, earnings slowed to 2.8% from 2.9% in July, which fell short of estimates of 3.0%.
The pound initially fell after the data as the soft earnings reading takes the pressure off the Bank of England to raise interest rates sooner-than-expected. But the overall positive outlook for the UK jobs market helped lift sentiment for the UK currency following yesterday’s sharp losses on the back of the weak inflation figures.
Sterling quickly reversed course and rallied to as high as 1.5365 dollars before easing slightly to 1.5345 dollars, recovering almost all of its losses from yesterday. Its recovery against the euro was more limited however and stood at 0.7430 pounds per euro in mid European session, down from Tuesday’s high of 0.7392 pounds per euro. Against the yen, sterling climbed to 183.40, having a touched a low of 181.83 yen on Tuesday.
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