Europe News

UK unemployment falls but wage growth disappoints


The U.K. labor market continued to improve in the three months to September but wage growth was below expectations, according to the latest data from the Office of National Statistics (ONS).

In its latest monthly report on the labor market, the ONS said the country's unemployment rate fell to 5.3 percent, the lowest level since the three months to April 2008.

Wage growth lagged expectations, however, with average weekly earnings rising 3 percent, year on year, in the three months to September, below forecasts for a 3.2 percent increase by analysts polled by Reuters.

Sterling fell to $1.5143 against the dollar after the data, down from $1.5170 beforehand.

Alex Segre | Getty Images

Data released last month showed that unemployment fell by 79,000 in the three months to August to 1.77 million, with the unemployment rate at 5.4 percent. Pay for employees, including bonuses, increased 3 percent between June and August.

The Bank of England has said it is keeping a close eye on wage growth in considering when to hike interest rates, an event not expected to take place now before a U.K. referendum on membership of the European Union (EU).

Reacting to the latest data, the chief U.K. and European economist at IHS Global Insight said the jobs report would "do little to clarify the uncertainty over exactly when the Bank of England will hike interest rates."

"While a marked rise in employment and fall in the unemployment rate points to a further tightening of the labor market which is supportive to interest rates rising sooner or later, the marked slowdown in earnings growth in September itself argues against an early rate hike."

IHS retained the view that the Bank of England "is more likely than not" to edge interest rates up from 0.50 percent to 0.75 percent around May.

The data adds to a robust outlook for the U.K. In early October, the International Monetary Fund (IMF) forecast U.K. growth of 2.5 percent in 2015, and 2.2 percent in 2016, revising its July forecast upwards. In addition, it highlighted the economy as a rare bright spot amid a gloomy global outlook.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld