UK unemployment unexpectedly fell in July

Unemployment in the UK was lower than expected for the three months ending in July, amid stronger wage growth.

The unemployment rate was unchanged from the previous month’s level of 5.5%, according to the Office for National Statistics.

Nevertheless, the estimate for the previous three months was revised lower by one tenth of a percentage point from the preliminary estimate of 5.6%.

Economists had been expecting it to remain steady.

Wage growth over the same time frame, excluding bonuses, printed at 2.9%. That was up from the 2.8% clip seen over the previous two months but as expected by analysts.

The number of hours worked decreased by 0.4% in the three months to July to reach 994.2m.

The claimant count edged up by 1,200 from the previous month to reach 791,700.

Average weekly earnings sped ahead at a 2.9% year-on-year pace in the three months to July, rising from 2.6%. So-called ‘core’ earnings, which exclude bonus payments, increased at the same clip.

For the single month of July the year-on-year rate of growth in average weekly earnings jumped to 3.7% from 2.3%, led by an acceleration in private sector wage growth to 4.4%, from 2.5%.

“July’s marked rise in earnings growth may well lift belief that the Bank of England could yet lift interest rates from 0.50% to 0.75% as soon as the first quarter of 2016.

“At the same time though, consumer price inflation of 0.0% in August and recent evidence that the economy has hit a soft patch during the third quarter promotes the case for the Bank of England to delay raising interest rates”, said Dr.Howard Archer, chief UK+European economist at IHS Global Insight.