May 15, 2018 / 9:11 AM / 2 months ago

UPDATE 1-UK employment jumps but strong wage growth still elusive

 (Adds reaction, detail)
    By Andy Bruce and William Schomberg
    LONDON, May 15 (Reuters) - British employers hired many more
workers than expected in early 2018 but wage growth has yet to
accelerate sharply, according to figures that leave the Bank of
England still waiting for signs the economy is ready for a rise
in interest rates.
    Employment rose by 197,000 during the first three months of
this year, the biggest jump since late 2015 and far exceeding
the 130,000 consensus expectation of a Reuters poll of
economists.
    Sterling and British government bonds were little moved by
the figures, which showed a familiar picture of solid growth in
jobs, unemployment at its lowest level in decades, but only a
modest pick-up in pay for most British workers, who have been
hit by higher inflation since the 2016 Brexit vote. 
    Annual growth in earnings, excluding bonuses, edged up to
2.9 percent in the three months to March after a 2.8 percent
rise in February, the Office for National Statistics (ONS) said
on Tuesday, as expected in the Reuters poll.
    While this was the biggest increase since the three months
to August 2015, it represented only a 0.4 percent increase in
pay in inflation-adjusted terms.
    Including bonuses, total pay growth cooled to 2.6 percent
from 2.8 percent in the three months to February, as expected.
    Last week the BoE left interest rates on hold, despite
saying in February that borrowing costs were likely to go up
more quickly than it had previously thought. It said it wanted
to be sure the economy was bouncing back after barely growing in
the first quarter.
    Economists said the strength of hiring in Tuesday's figures
suggested Britain's economy did not have such a bad start to
2018 as portrayed by the preliminary official data.
    "On balance, the combination of robust employment growth,
falling unemployment and stronger underlying earnings growth --
as well as a clear relapse in productivity in the first quarter
-- looks supportive to a Bank of England interest rate hike in
August," said Howard Archer, chief economic adviser to the EY
ITEM Club consultancy.
    "However, much is likely to depend on whether the UK economy
sees clear signs of marked improvement over coming months."
    The ONS published new figures for employment of foreign
nationals and for productivity, a long-term problem for
Britain's economy.
    Output-per-hour fell by 0.5 percent quarter-on-quarter in
the three months to March after a 0.7 percent rise in the fourth
quarter of 2017, marking the biggest fall since late 2015 and
denting hopes that British productivity was on the mend.
    Less than a year before Britain is due to exit the European
Union, the ONS said the number of EU nationals employed in
Britain fell by 1.2 percent from a year ago to 2.292 million --
the biggest drop in percentage terms for eight years.

 (Reporting by Andy Bruce
Editing by Catherine Evans)
  
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