Does good UK jobs data mask an impending low pay problem? | Larry Elliott

Labour market is more robust than the City expected, but falling pound and hard Brexit will squeeze wages and living standards

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Britain’s labour market was strong in the months leading up to the seismic decision to leave the European Union. Employment was at a record high. There were plenty of vacancies for job seekers. The unemployment rate was below 5%.

Fears of an immediate post-referendum shock have so far not been realised. Employment is still rising. There are more than 700,000 job vacancies. The unemployment rate remains below 5%.

Related: UK employment rate at record high despite vote to leave European Union

Some in the remain camp believe Brexit is the biggest policy blunder since Suez in 1956, but it would be hard to draw that conclusion from the labour market data.

Employment was up by 106,000 in the three months to August, almost but not quite sufficient to soak up the 116,000 increase in the supply of labour. Despite a 10,000 increase in unemployment, influenced by public sector cuts, the jobless rate was steady at 4.9%.

There is nothing in the figures from the Office for National Statistics to suggest that the economy has fallen off a cliff. Indeed, they make a fresh rate cut from the Bank of England next month less likely.

It is, though, much too early to sound the all-clear. The quarterly increase in employment was certainly bigger than the financial markets were expecting, but was still smaller than the increases seen earlier in 2016. What’s more, firms will take time to make their post-Brexit plans and there have been some hints – from the Bank of England’s agents and from the British Chambers of Commerce – that fewer people will be hired over the coming months.

Even a gentle rise in unemployment over the coming months will have an impact on pay. The latest ONS release shows that regular pay in the three months to August was 2.3% higher than in the same three months of 2015.

Related: Warnings over rising food prices as UK inflation hits near two-year high of 1%

But if workers have only been able to secure wage rises of just over 2% in a year when employment has risen by half a million, it is hard to see why pay awards should be any more generous during a period of heightened post-Brexit uncertainty.

During and after the recession of 2008-09, workers sacrificed pay in order to hold on to their jobs, even when sharply higher oil prices meant wages were not keeping pace with inflation. Another squeeze on living standards is now in prospect courtesy of the recovery in the cost of crude and the fall in the value of the pound.