LONDON — Unemployment in the UK fell once again in April, but wage growth is falling as Brexit squeezes consumers, according to the latest data released by the Office for National Statistics on Wednesday.
Headline unemployment was 4.6% in the month, dropping from the 4.7% seen for past months, and below the forecasts of economists. There were 53,000 fewer people unemployed, the ONS said.
“There were 1.54 million unemployed people (people not in work but seeking and available to work), 53,000 fewer than for October to December 2016 and 152,000 fewer than for a year earlier,” the statistical office said.
Headline employment also rose in April, hitting 74.8%, up from 74.6% in previous months. The new employment rate is the highest since comparable records began in 1971, the ONS said.
Here is how April’s unemployment numbers look as part of the 40-year trend:
Since the Brexit vote, various economists and financial institutions have predicted that the UK’s unemployment rate will shoot up as a result of the vote to leave. Credit Suisse, for example, predicted an increase to 6.5% for the base rate, equivalent to roughly 500,000 jobs being lost. However, the last few months have seen the rate remain near its record low and Wednesday’s figures show the trend appears to be holding up.
Wage growth disappoints, Brits feel the squeeze
Both unemployment and employment may have surpassed expectations in April, but wage growth disappointed. Average weekly earnings (excluding bonuses) grew by 2.1% over the ONS’ data period. That was compared to a previous figure of 2.2%, and economists forecasts of the same number.
With inflation currently sitting at 2.7%, Wednesday’s wage numbers confirm that real wages are actually falling in the UK for a second consecutive month.
“Latest estimates show that average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) increased by 0.1% including bonuses, but fell by 0.2% excluding bonuses, compared with a year earlier,” the ONS said in its release.
Prices are rising across the board thanks to the fall in the pound seen since last summer’s referendum, with food prices increasing particularly rapidly.
Here’s the ONS’ chart:
The ONS’ troubling wage data comes less than a week after Bank of England Governor Mark Carney gave a stark warning about the state of the UK’s household finances as Brexit driven inflation squeezes incomes.
“The second [issue regarding wages] is that we have expected since the summer of last year that there would be a squeeze on real incomes around this time, and basically over the course of this year,” Carney said at a press conference following the release of the BoE’s Quarterly Inflation Report.
“In other words, that the wages people are getting are not going to be sufficient to compensate for the rises in consumer prices, prices in the shop.
“So this is going to be a more challenging time for British households over the course of this year, real income growth — to use our terminology — will be negative. To use theirs [layman’s] wages won’t keep up with prices for the goods and services they consume.”