The number of people in work has fallen by the largest amount in almost three years, leading economists to wonder if the jobs boom is coming to an end.
A total of 32.08 million people were in work between August and October, 56,000 fewer than in the previous three months and the sharpest drop since May 2015, the Office for National Statistics reported yesterday.
Britain has enjoyed a remarkable period of jobs creation since 2012, with the employment rate reaching a record high of 75.3 per cent in June. Since then, however, it has plateaued.
Stephen Clarke, an analyst at the Resolution Foundation think tank, said that the jobs boom might have reached the end of the road.
“This still leaves Britain with one of the highest employment rates in Europe, though still some way behind countries like Germany, the Netherlands and Sweden,” he said.
Other analysts disagreed. Andrew Wishart, an economist at Capital Economics, said that the fall was likely to be a blip. He said: “All of the hiring surveys that we track point to annual employment growth accelerating significantly . . . while unfilled vacancies are at a record high.”
The number of vacancies increased by 14,000 to 798,000 compared with the previous three months. The biggest demand for staff was in social work, retail and car mechanics.
Previous analysis by the Bank of England has suggested that vacancies can often be artificially high, however, because it costs little to advertise for new staff. Often employers are merely fishing for better workers.
Despite the fall in the number of people in work, the unemployment rate remained at a 42-year low of 4.3 per cent. There were 1.4 million people unemployed between August and October, 26,000 fewer than the previous three months, the lowest rate since 1975. The reason that the levels of unemployment and employment both fell was due to a rise in the number of people who were classed as economically inactive.
This includes students, those on long-term sick leave, people who have taken early retirement or those who have given up looking for work. It increased by 115,000 to 8.8 million. Analysts believe that this rise is likely to be older workers choosing to take early retirement.
One source of good news in the figures was a tentative sign that wage growth has begun to pick up, suggesting that years of workers enduring sluggish pay rises may be ending.
Average weekly wages rose by 2.3 per cent in the three months to October, up from 2.2 per cent in September, while wages including bonuses rose by 2.5 per cent, the fastest increase this year.
The rise suggests that workers may be starting to push for higher pay or are asking for a better salary when taking a new job.
Economists and policymakers at the Bank of England have been left baffled over the past year that wages have failed to gather pace as the unemployment rate is now lower than the level at which workers can usually take the upper hand in pay talks.
Wage growth is running at about half the pace that was typical before the financial crisis. Wages, however, are continuing to rise more slowly than the prices of goods and services, meaning that households are feeling a squeeze on their incomes.
Inflation was at a five-year high of 3 per cent in October, meaning that wages, once they were adjusted, fell by 0.4 per cent.
The number of people in work may have fallen by the largest amount in nearly three years but Britain’s unemployment rate continues to be one of the strongest elements of the economy (Tom Knowles writes).
Unemployment dropped by 26,000 between August to October. It is hovering at a rate of 4.3 per cent, the joint lowest since 1975, although not quite as good as 3.4 per cent in 1973.
“We’re ending the year on a strong note,” Damian Hinds, the minister for employment, said. With Brexit uncertainty continuing, economists are asking whether this could be as low as unemployment can go.
Ian Stewart, the chief economist at Deloitte, said: “The cloud on the horizon is that slowing growth next year is likely to put a brake on hiring. Our hunch is that the fall in the unemployment rate has probably bottomed out for this cycle.”
A breakdown of the figures suggests that he may be right. Unemployment rose by 4,000 in October, the first increase in a year. Yet technically, there is nothing to prevent unemployment falling further.
The issues are skills and geography, George Buckley, of the investment bank Nomura, said. “There is no guarantee that the people available are skilled in the jobs needed,” he said. “You also have to be in the right location for the opening.”