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Employment slows - Fears over UK Economy

A year-long improvement in the unemployment rate stalled in September, according to official figures, fuelling concerns of a sharper than expected slowdown in the UK’s economic recovery.

A rise in employment of 112,000 was unable to bring down the unemployment rate from the 6% recorded in August, figures from the Office for National Statistics (ONS) showed.

But wages picked up more strongly than forecast and one measure of average weekly earnings jumped marginally ahead of inflation. The figures will cheer ministers, who have waited anxiously for a return to growth in real wages.

In the three months to September 2014 wages increased by 1.3% when bonuses are excluded, compared to an inflation rate of 1.2% in September.

Cutbacks in bonus payments alongside a shift to low-paid work and self-employment have proved a drag on average wage rises over the last year, undermining predictions that the recovery in growth since the beginning of 2013 would quickly feed through into higher wages.

Some economists preferred to highlight figures for September alone, which revealed an even bigger boost to pay of 1.8% year on year, excluding bonuses – the strongest in over two years.

Most analysts said the small quarter-on-quarter rise in wages was unlikely to shift the majority view of the Bank of England’s monetary policy committee, which sets base interest rates. The committee has kept rates at 0.5% in response to the failure of wages to rise consistently above inflation.

The number of unemployed on the Labour Force Survey measure fell by 115,000 in the three months to September to stand at 1.96m, which is the lowest level for almost six years. However, the decline was down from a drop of 154,000 in the three months to August.


Howard Archer, chief economist at IHS Global Insight, said that while the claimant count fell by 20,400 in October to stand at 931,700, which was the lowest level since August 2008, “this was modestly above the 18,400 drop seen in September and clearly down from declines of 33,200 in August, 37,400 in July and 39,500 in June”.

Rob Wood, chief economist at Berenberg bank, said the outlook for the UK remained rosy.

“UK employment rose in the three months to September, close to consensus expectations as a softer few months of jobs gains seems to have passed. While unemployment held steady in September, compared to consensus forecasts for a drop, there is every sign of jobless queues continuing to fall rapidly in the months ahead, with jobless claims down again in October and firms continuing to hire.

George Osborne said unemployment had fallen over the last two years and welcomed “encouraging signs that pay cheques are beginning to rise faster than inflation. If we want to keep Britain on this path then we need to keep working through our economic plan”.