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UK employment hits new record high as Bank weighs rate cut

Tom Belger
Finance and policy reporter
Commuters on London Bridge. Photo: REUTERS/Henry Nicholls

The employment rate in the UK hit a new record high at the end of last year despite the political turmoil over Brexit, official figures show.

The official employment rate came in at 76.3% of the workforce and the unemployment rate was unchanged at 3.8% between September and November.

“Over two-thirds of the growth in people in work in the last year coming from women working full-time," said David Freeman, ONS head of labour market and households.

"Self-employment has also been growing strongly, and the number of people working for themselves has now passed five million for the first time ever."

Employment minister Mims Davies said the number of high-skilled jobs had also risen, and that Jobcentre staff were increasingly focused on getting workers into better-paid roles.

“This, coupled with business confidence turning a corner, is paving the way for an even stronger jobs market in 2020,” she said.

READ MORE: UK wage growth slows as small firms ‘struggle to raise salaries’

The statistics from the Office for National Statistics (ONS) are closely watched as a sign of the underlying strength of the UK economy.

Britain has seen a jobs boom in recent years, taking some economists by surprise as economic growth has been sluggish and Brexit uncertainty has rattled firms.

Last month’s figures had shown employment between August and October reach 76.2%, a previous record high.

“Economic growth is currently as glacial as the winter weather, but the UK’s job creation engines are still running hot," said Pawel Adrjan, UK economist at the jobs site Indeed.

READ MORE: Half of UK business leaders predict 2020 recession

It comes in spite of warnings by two leading recruitment firms last week that heightened political uncertainty around the election and Brexit have dented employer hiring.

PageGroup (PAGE.L) highlighted falling client confidence as it confirmed it had slashed staff, while shares in rival Hays (HAS.L) crashed as it issued a profit warning.

The figures also come in spite of a string of other weak official data, which had fuelled expectations that the Bank of England could slash interest rates later this month in a bid to revive growth.

Bank of England governor Mark Carney could oversee a cut to interest rates at the end of January. Photo: PA

READ MORE: Recruiter PageGroup slashes jobs as UK vacancies dry up

GDP data last week showed UK firms’ output going into reverse, with the overall economy unexpectedly shrinking by 0.3% in November.

It marked only a 0.6% rise in output on the same month one year earlier, the slowest annual increase since 2012 as Brexit uncertainty eroded growth.

Further signs of a sluggish economy came in official inflation figures also published last week. The separate ONS data showed price growth slowing to a three-year low of 1.3% in December.

The low inflation rate increased pressure on the central bank to intervene, as it has a mandate to target an inflation rate of 2%. The pound fell when the numbers were released.

READ MORE: Expectations grow of a rate cut as policymakers speak out

But recent business surveys have painted a stronger picture of the economy than official data, with several polls suggesting business confidence and activity has picked up since the general election.

Prime minister Boris Johnson’s victory was welcomed by many business leaders, giving at least some short-term clarity over Brexit and ending the prospect of a radical left-wing Labour government.

An Institute of Directors’ poll last month showed the sharpest leap in business confidence among its members since 2016.

The number planning to increase investment and hiring rose significantly in December. Property prices have also seen a reported ‘Boris bounce.

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The Bank of England’s monetary policy committee is due to announce its next interest rate decision on 30 January. Several policymakers have said in the past fortnight they could back a reduction in rates if data does not improve.

Any cut to interest rates would be the first downwards movement since August 2016, when the bank briefly lowered the borrowing rate to 0.5% after the EU referendum. The UK interest rate currently stands at 0.75%.

“With wages growth still fairly robust and unemployment still low there doesn’t seem to be any risk in the Bank of England exercising a little patience and waiting until the March budget before making a decision on rates,” said Michael Hewson of CMC Markets shortly before the data was released.