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UK labour market: still waiting for the Brexit effect - HL comment

Ben Brettell, Senior Economist, Hargreaves Lansdown:

The UK’s labour market continues to surprise with its resilience to the Brexit shock. The unemployment rate fell unexpectedly to a new 11-year low of 4.8% in the three months to September. This is yet more evidence that the labour market and the wider economy have fared better than expected since June’s referendum.

However, there could be storm clouds gathering on the horizon. The claimant count – which in a quirk of the data is a more recent figure than the unemployment rate – jumped by 9,800 in October, with September’s figure revised upwards from 700 to 5,600. All in all, it does seem likely that unemployment could tick up somewhat during the coming months, though dire predictions made in the immediate aftermath of the vote appear wide of the mark.

Wage growth held steady at 2.3%, but it’s probable pay will fall in real terms over the coming year or so. An industry survey released earlier in the week showed employers expect to make pay settlements of 1.1% at present - well below many predictions for inflation, which the Bank of England forecasts will hit 2.7% next year.