The jobless total drops by 103,000 but slowing pay growth prompts speculation that an interest rate hike remains some way off.

Unemployment fell by 103,000 to 1.75 million in the three months to September, according to the Office for National Statistics.

However data from October on the numbers claiming Jobseeker’s Allowance and some of those on universal credit showed an increase of 3,300 to 795,500.

Meanwhile growth in regular pay – excluding bonuses – slipped to 2.5% for the July-September period, compared to 2.8% in the three months to October.

With inflation close to zero it means that real terms pay growth – the extra spending power in workers’ pockets – is still strong.

Employment Minister Priti Patel said: “Employment is at a record-breaking high, and wages have continued to grow strongly, demonstrating that this Government is delivering for hard-working people.”

But the softening wage picture shown by the latest figures prompted speculation that the timing of a UK interest rate rise – which has already receded in the wake of latest Bank of England projections last week – could be pushed back further.

ONS statistician Nick Palmer said:

“These figures continue the recent strengthening trend in the labour market, with a new record high in the employment rate and the unemployment rate still at its lowest since spring 2008.

“Earnings continue to grow, albeit the rate for regular pay has fallen back a little from recent months.”

The unemployment rate fell to a lower-than-expected 5.3% while the number of people in work in July-September, at 31.21 million, was 177,000 higher than in the previous three-month period.

Vicky Redwood, chief UK economist at Capital Economics, said: “The latest UK figures show a fairly solid labour market, but not one strong enough to warrant an interest rate rise soon.”

Markit chief economist Chris Williamson said: “Pay growth remains central to policymaking, and interest rates are likely to stay on hold for as the official data show pay growth remaining subdued.

“Today’s data therefore support the Bank’s current projections that there will be no need to raise interest rates until 2017 due to persistent low inflation.”

TUC General Secretary Frances O’Grady said: “Pay growth was stronger in the first half of the year, but it has been flat for the last three months.

“This is especially worrying given that the government is about to announce severe cuts, which will reduce demand across the economy, making pay growth harder to maintain.”

Source: Sky News

Date: 11 November 2015