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UK labour market - the good, the bad and the indifferent

Ben Brettell, Senior Economist, Hargreaves Lansdown:

As we’ve come to expect in recent months, today’s labour market stats from the ONS contained a mixture of good, bad and indifferent.

Wages in the three months to October grew 2.5% on a year earlier, an acceleration from the previous month’s 2.3%. But the consumer squeeze which has been evident since last year’s referendum continues, as pay adjusted for inflation is still falling.

Unemployment remained at a multi-decade low of 4.3%, though economists had on average forecast a drop to 4.2%. There were also tentative signs of weakness, with the number of people in work falling by 56,000 – the second such decline in a row.

The bigger picture is that the labour market remains robust, with employment close to all-time highs and plenty of vacancies if you’re seeking work. The pay squeeze continues for now, but with wages growing a little more strongly and inflation set to fall back in the new year, this looks like it’ll come to an end in the next few months. We should remember, however, that the only true driver of real pay growth and rising living standards is productivity growth. This is something the UK has struggled with since the financial crisis, and as yet nobody seems to have solved the puzzle.