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Biggest fall in UK employment in four years as firms axe part-time staff

Tom Belger
Finance and policy reporter
Labour market “showing more signs of strain.” Photo: Andrew Matthews/PA Images via Getty Images

The number of people in work in Britain has fallen at its fastest pace over a quarter in more than four years as employers have axed jobs, new figures show.

Employment is still near record highs as Britain gears up for a general election and another Brexit deadline, but the proportion of people in work fell 0.1 percentage point to 76% between July and September.

32.75 million people were in work over the summer, down 58,000 on the quarter, according to the latest figures from the Office for National Statistics (ONS) on Tuesday.

One economist said the labour market was “showing more signs of strain” as the ONS highlighted record quarterly declines in women in work, down 93,000, and in part-time workers, down 164,000. But full-time posts rose by 106,000.

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But the decline was lower than the consensus forecast of a 102,000 decline.

The unemployment rate, the number of people actively looking for jobs, at 3.8%, was also at its lowest level since 1974 after dropping 0.1 percentage point on the previous month.

The fall in both employment and unemployment can be explained partly by a rise instead in the ‘economic inactivity rate’ —the number of people neither working or looking for work.

The inactivity rate, which includes people not working for health, care, study and other reasons, was 0.1 percentage point higher at 20.8%.

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Britain has seen a period of continued job creation that has taken many economists by surprise, amid low levels of investment, productivity and growth as Brexit rattles the economy.

The labour market appears to be holding up but the latest figures will be seen as a sign it could be fraying, with the number of vacancies declining for the ninth month in a row.

It comes a day after separate figures from the ONS showed Britain had avoided recession, but annual growth in the UK economy had slowed to its lowest pace in almost a decade.

The GDP figures showed the total size of goods and services produced in Britain had increased by 0.3% in the third quarter.

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Tej Parikh, chief economist at the Institute of Directors, said: “The UK jobs market remains a source of resilience for the UK economy, but it is showing more signs of strain.

“With so many in work there has been a lift to household incomes, which has supported the economy through a challenging period. However, businesses are now finding it harder to access the talent needed to fill openings, so jobs growth is expected to slow further.

“Many firms are also putting recruitment plans on ice as wider projects and investments are bottled up by uncertainty. Vacancies are likely to continue falling.”

Andrew Wishart, UK economist at Capital Economics, said: “The figures appear to illustrate that demand for labour is easing, but no sharp downturn which is a relief following disappointing GDP growth in Q3 and downbeat activity surveys.

“Our forecast is that the [Bank of England monetary policy committee] would cut interest rates by May next year if Brexit uncertainty stays high, but that the need for stimulus would be averted if there is a Brexit deal that causes the uncertainty to lift.”