May 15, 2018 / 11:46 AM / 7 months ago

UPDATE 2-Jobs surge points to firmer UK economy, wage signals mixed

    * UK employment surges in early 2018
    * Official data suggests weak economy in Q1 may be temporary
    * Wage growth data still mixed
    * Bank of England waiting for rebound signs before raising
rates
    * Sterling, gilts little changed

 (Adds reaction)
    By Andy Bruce and William Schomberg
    LONDON, May 15 (Reuters) - British employers hired many more
workers than expected in early 2018, a tentative sign that the
economy's weak start to the year may be temporary, as the Bank
of England hopes.
    Employment rose by 197,000 during the first quarter, the
biggest jump since late 2015 and far exceeding the 130,000
consensus expectation of a Reuters poll of economists.
    The figures painted a familiar picture of strong growth in
jobs and unemployment at its lowest rate 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. 
    Sterling pared its losses on the day against the U.S. dollar
and British government bonds were little changed.
    Annual growth in earnings, excluding bonuses, edged up to
2.9 percent in the three months to March, as expected in the
Reuters poll.
    While this was the biggest increase since mid-2015, it
represented only a 0.4 percent increase in pay in
inflation-adjusted terms, the Office for National Statistics
(ONS) said.
    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, saying it
wanted to be sure the economy was bouncing back after barely
growing in the first quarter. In February it had said rates were
likely to go up more quickly than it previously thought.
    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.
    "Broadly, these data provide ammunition for the BoE's view
that Q1 weakness was transitory and that the UK is operating at
its speed limit," HSBC economist Elizabeth Martins said.
    But the Resolution Foundation think-tank, which focuses on
living standards, described the wage growth figures as
underwhelming.
    
    PRODUCTIVITY SLOG
    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 in the three months to
March after a 0.7 percent rise in the fourth quarter of 2017,
marking the biggest quarterly fall since late 2015 and denting
hopes that British productivity was on the mend.
    "The decline in UK productivity in the first quarter is a
clear warning sign that positive real wage growth should not be
taken for granted," Suren Thiru, head of economics at the
British Chambers of Commerce, said.
    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.
    "Labour supply looks set to fall further in the coming
months, partly due to an abrupt plateauing in the number of EU
citizens in employment in the UK," said Gerwyn Davies, senior
labour market analyst at the Chartered Institute of Personnel
and Development.
    The ONS published figures for the number of people claiming
unemployment benefits -- once a reliable early gauge of
recession that has been undermined to some extent by changes to
Britain's welfare system in recent years.
    Nonetheless, this showed a 31,300 monthly increase in the
number of claimants -- the largest rise since July 2011.

    
 (Graphic by Andy Bruce, Editing by Catherine Evans)
  
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