Unemployment falls to 11-year low but timelier claimant count rises

UK unemployment fell to its lowest rate in 11 years in September, though a more recent measure of the claimant count showed a larger increase than expected in October.

The unemployment rate for the three months to the end of September dropped to 4.8% versus the same period last year, data from the Office for National Statistics showed, down from 4.9% a month ago and with economists expecting it to remain flat.

Employment growth slowed sharply, with a rise of 49,000 in the three months to September well down from August’s 106,000 and some way below the consensus forecast of 91,000.

Average earnings in the same three month period grew 2.4%, improving as expected from the 2.3% a month ago.

The release from the ONS was the first three-months of data since the result of the EU referendum.

But a more recent figure from the ONS for the claimant count showed a month-on-month increase in October of 9,800, versus a consensus forecast of 2,000 and the previous month's 0.8K rise.

“Unemployment is at its lowest for more than ten years, and the employment rate remains at a record high. Nonetheless, there are signs that the labour market might be cooling, with employment growth slowing," said ONS statistician David Freeman.

He said there was "limited evidence" so far that the Brexit vote and subsequent devaluation of sterling "has had little impact so far on the number of EU workers in the UK labour force", with official migration data not available until February 2017.

Economist Ruth Gregory at Capital Economics said the figures confirmed indications from recent surveys that vote to leave the EU "is starting to sap the jobs recovery of its previous strength".

Looking ahead, she said the rise in the claimant count was a useful guide to future movements in the headline measure, with the weakening in the employment surveys suggesting employment growth will probably slow further.

"This moderation should prevent wage growth from picking up in coming months. So after a few years of positive real wage growth, households will see higher inflation close to eroding this entirely over the coming years, constraining consumer spending growth."

Ben Brettell at Hargreaves Lansdown said the labour market "continues to surprise with its resilience to the Brexit shock", but agreed that the claimant count indicated storm clouds gathering on the horizon.

"All in all, it does seem likely that unemployment could tick up somewhat during the coming months, though dire predictions made in the immediate aftermath of the vote appear wide of the mark."