U.K. Job Market Cools as Wages Fall Further Behind Inflation

By Geoffrey Smith

Investing.com -- The U.K. labor market showed signs of cooling off on Tuesday, with growth in both jobs and earnings slowing and vacancies showing their first quarterly fall in a year.

The number of people claiming jobless benefits in July fell by 10,500, keeping the jobless rate at 3.8% of the workforce. However, that was the smallest drop in 17 months and was less than the 32,000 expected.

At the same time, vacancies in the three months through July fell 1.5% to 1.274 million, their first drop in nearly a year.

The Office for National Statistics’ Labor Force Survey, which lags the claimant count and vacancies numbers by a month, also pointed to a slowdown in employment growth, with the three-month increase through June slowing to 160,000 from 296,000 through May.

Employment still stood at a record high 29.7 million at the end of the month, suggesting that the cost-of-living crisis has sucked workers back into the workforce as they struggle to make ends meet.

However, the increase in employment was accounted for completely by non-U.K. nationals, as has been the case for the last nine months, according to the ONS’s figures.

Samuel Toombs, an analyst with Pantheon Macroeconomics, said the figures suggest that COVID had had a bigger influence on the labor market than Brexit, which has ended the automatic right to work for EU nationals in the U.K.

Average wages excluding bonuses again failed to keep pace with inflation, although growth accelerated to 4.7% from 4.4%. Including bonuses, growth slowed to 5.1% from an upwardly revised 6.4%.