UK labour market shows early signs of cooling

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The UK’s labour market showed early signs of cooling with a small increase in unemployment over recent months according to the latest official figures, but rising underlying wage growth showed that inflationary pressures are still strong.

The figures from the Office for National Statistics showed that the unemployment rate crept up 0.1 percentage points to 3.8 per cent in the second quarter of this year with the employment rate falling by the same amount to 75.5 per cent.

That rate was one percentage point below the pre-pandemic level and left 281,000 fewer people in work than before Covid-19 struck.

But the labour market was still tight with 1.27mn job vacancies in the three months to July, a small decline from a record level, available for the 1.29mn people who were registered as unemployed and seeking to start work immediately.

With the labour market remaining tight, the Bank of England will be concerned that underlying wage growth, excluding bonuses, rose to an annual rate of 4.7 per cent in the second quarter. With inflation much higher, however, real wages declined 3 per cent over the same period, the fastest drop in the measure since comparable records began in 2001.

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