UK: Labour data shows Brexit resilience - ING

James Knightley, Senior Economist at ING, notes that the UK jobs growth is holding up well, but as Brexit uncertainty creeps in we expect this to slow after the latest UK labour market data came broadly in line with expectations.

Key Quotes

“Employment rose 174,000 in the three months to July (consensus 171,000) while the unemployment rate remained at 4.9%. Average weekly earnings excluding bonuses edged lower to 2.1%YoY from 2.3%, while total weekly earnings growth slipped from 2.5% to 2.3%.

The employment figures have held up well despite Brexit because the data is a rolling 3M figure. It includes numbers for May and June, ahead of the Brexit referendum, which most corporates expected to result in the UK staying in the European Union.

We have to remember that it also takes time for businesses to react to shock outcomes, like the Brexit vote. Few businesses would pull job offers they had already made because of the outcome. Unfortunately, several surveys (including the BoE’s and Deloitte’s CFO surveys) suggest that hiring intentions have weakened substantially. Consequently, we expect to see softer jobs growth in coming months while wage growth is unlikely to accelerate with businesses set to act cautiously on pay given the economic uncertainty.”