The UK jobless claimant count fell sharply in January by 42,400 following a revised decline of 20,500 for December which was originally reported as a drop of 10,100 for the month. This was the sharpest decline since the fourth quarter of 2013 and suggests a firm labour market, although there will also be some doubts over the data’s accuracy amid distortions caused by changes to the welfare payments system.
Unemployment fell by 7,000 to 1.6mn in the three-month period. The unemployment rate was in line with expectations and held at 4.8% for the month which is the lowest rate since the third quarter of 2005.
Employment increased 37,000 in the latest 3-month period and there was an increase of 302,000 compared with the previous year despite a decline in the number of employed people over 65.
There was a small decline in the number of EU nationals employed in the UK for the fourth quarter of 2016 which may indicate that the Brexit vote has started to have an impact in encouraging EU citizens to leave the UK and this development will be watched closely over the next few months.
The average earnings data was weaker than expected with a headline increase of 2.6% in the year to December from 2.8% the previous month and compared with expectations of 2.8% for the month. Excluding bonuses, there was a decline to 2.6% from 2.7% previously.
The Bank of England reiterated at this month’s policy meeting that earnings growth was one of the key elements being monitored by the Monetary Policy Committee (MPC). The case for maintaining an aggressive monetary stimulus was built in part on expectations that earnings growth would remain subdued. This data will reinforce confidence within the MPC that these expectations are justified and will dampen expectations that the MPC will be forced to consider a policy tightening.
Sterling weakened after the data as markets concentrated on the earnings data with GBP/USD dipped to lows below 1.2430, although EUR/GBP was capped below the 0.8500 level. Gilts were in positive territory, but did not respond significantly to the data while the FTSE index extended gains.
UK Average Earnings