UK unemployment remains unchanged in August, wage growth slows

Office for National Statistics (ONS) data showed the claimant count for August rose by a bigger-than-expected 2,400 after July's first drop in five months, though this had little effect on the claimant count rate of 2.2% though the ONS made a significant revision to the claimants figure for July.

Although the figures are less timely, annual growth in average weekly earnings in the three months to July slipped to 2.3% from the revised 2.5% from a month before, though this was less than the slowdown to 2.1% economists had forecast.

The ONS data showed that employment growth rose modestly, with a 174,000 rise in the three months to July up from 172,000 in June and ahead of a consensus forecast of 171,000, which meant that the employment rate stood at the joint highest since records began in 1971.

Economists and analysts felt the figures added to expectations that the Bank of England's monetary policy committee will stand pat on as it makes its policy announcement on Thursday.

Market analyst Joshua Mahoney at IG said that as the data was coming at a time when markets are highly sensitive to UK employment data, the ONS figures offered "little to boost or knock the chance of action from the BoE".

Economist Howard Archer at IHS Market said the data showed the current resilience of the labour market as employers seemingly adopt a “wait and see” approach after June’s Brexit vote.

"However, it still looks likely to be increasingly pressurized by mounting uncertainties over the coming months," he said, adding that the softer earnings growth in July "fuels suspicion that companies will look to clamp down on workers’ pay" in the face of imported inflation, which will then prove a double weight on consumers’ purchasing power and hence consumer spending.

Data in coming months will give a better impression of the economy's ability to withstand the shock of the Brexit decision, with Wednesday's ONS report only covering a part of the post referendum period.

Deloitte's Ian Stewart said the "early message from these numbers is that the jobs recovery rolls on", but Ruth Gregory at Capital Economics said she felt that given the time lags involved it was "not particularly surprising that the latest data showed that labour market activity has yet to suffer from the apparent post-referendum slowdown in economic growth".

She added that timlier data suggest that the "worst is yet to come", with the vote to leave the EU probably causing some firms to put hiring decisions on hold or cut back headcounts altogether, while agreeing that a weakening jobs market and the exchange-rate induced rise in inflation, "should start to eat into households’ spending power ahead".