Fears that a Brexit vote would trigger widespread job losses failed to materialise last month, with the number of people claiming jobseeker’s allowance unexpectedly falling.
The claimant count fell by 8,600 to 763,600 in July, compared with expectations of a rise of 9,500, according to the Office for National Statistics (ONS). It was the first monthly fall since February 2016.
The unemployment rate in the three months to the end of June was unchanged at 4.9%. Average weekly earnings excluding bonuses rose 2.3% over the same period, up from 2.2%.
The number of people unemployed, defined as those not in work but seeking and available for employment, was 1.64 million for the three-month period, the lowest since March to May 2008.
There were 31.75 million people in work over the three-month period, 172,000 more than for January to March 2016 and 606,000 more than for a year earlier.
The employment rate (the proportion of people aged from 16 to 64 who were in work) was 74.5%, the highest since comparable records began in 1971.
Alan Clarke, an economist at Scotia Bank, said: “Ahead of the referendum, speculation was that the economy would grind to a halt, hiring would stall and investment plans would be put on ice. The first two haven’t happened; we will find out next week whether the third came good.
“But this does provide a glimmer of hope that if fears of the pre-Brexit jitters proved unfounded, maybe the post-referendum doom and gloom may equally prove to have been overcooked.”
But several economists warned that cutbacks over recent months by firms to their investment plans and a freeze on new hiring by many employers were early indicators of a worsening employment picture over the next year, dampening annual pay rises.
Scott Bowman, a UK economist at Capital Economics, said: “The vote to leave the EU should cause some firms to put hiring decisions on hold or cut back headcounts altogether, resulting in the unemployment rate drifting up over the coming quarters. This should contain any further rises in earnings growth and keep domestic cost pressures in check.”
He said the Bank of England should be able to follow through with more monetary easing in order to support the economy, without worrying about stoking domestically generated inflation too much.
The unemployment announcement comes hot on the heels of Tuesday’s inflation update when the consumer prices index (CPI) rose to a higher than expected 0.6% in July.
CPI was up from 0.5% in June, according to the ONS, with economists expecting the figure to be unchanged.
But while there was no sign of the plunge in the value of the pound having an impact on CPI, the ONS said the producer prices index (PPI) showed sterling’s slump had pushed up the cost of imports for British manufacturers, which could fuel inflation down the line.
Input prices rose 4.3% in the year to July, compared with a drop of 0.5% in the year to June, as the PPI was affected by the fall in the value of the pound following the Brexit vote, which drove up the cost of imported metals and chemicals.
This article was written by Phillip Inman Economics correspondent, for theguardian.com on Wednesday 17th August 2016 10.32 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010