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Buoyant jobs market eases pressure on Bank of England to cut rates

Phillip Inman
Photograph: Graeme Robertson/The Guardian

Britain’s jobs market staged a stronger than expected recovery in the three months to November, according to official figures, easing pressure on Bank of England policymakers to cut interest rates at their meeting next week.

The number of people in employment jumped by 208,000 over the period to a joint record high of 32.9 million, nearly double the 110,000 increase forecast by economists.

The figures from the Office for National Statistics appeared to show a slowdown in job creation over recent months had turned a corner.

Signs of weakness in the jobs market prompted two of the nine-member committee of Bank of England interest-rate setters to vote for a cut to borrowing costs at the end of last year.

Three others including the governor, Mark Carney, have said a further deterioration in the economy could persuade them to vote for a rate cut from 0.75% currently. The Bank is due to announce its decision on 30 January.

Wages growth stagnated at 3.2%, unchanged from the previous period and down from 3.9% in May to July, which was the highest since the 2008 crisis.

Pay including bonuses dropped to 3.4% from 3.5%, the ONS said. Unemployment remained at a 45-year low of 3.8%.

A reliance on self-employment to bolster jobs growth also waned. However, an increase in the number of self-employed workers over the previous year of 145,000 took the total to a record 5 million people and 15.2% of the workforce. Vacancies also fell, down 11,000 to 805,000 and more than 49,000 fewer than a year ago.

A statistician at the ONS, David Freeman, said: “While pay growth has eased since last summer, with inflation remaining subdued, earnings are continuing to increase in real terms.”

The TUC general secretary said strong wages growth had proved to be short-lived and the Treasury should focus on ways to improve living standards in the March budget.

“The long-promised return to healthy pay growth still hasn’t happened and working families are being forced into the red to get by,” Frances O’Grady said. “No more excuses: the government needs a plan to boost workers’ pay and living standards.”

The official data represented a snapshot of the economy before the election on 12 December. John Philpott, a labour market analyst and the director of the Jobs Economist, said the latest figures represented a surprising jobs surge that exceeded expectations.

“However, the jobs surge has made no difference to wage pressure. This combination of employment and pay figures presents Bank of England interest-rate setters with a dilemma,” he said. “Hawks will see the jobs surge as a signal to be cautious about a possible rate cut, whereas doves will point to slower wage growth as evidence that the economy needs a cut.

“All, however, may be concerned by the hidden message in these figures: a jobs surge in a stagnant economy means even weaker labour productivity, highlighting a threat to long-term sustainable growth.”