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UK unemployment rate rises, while wage growth hits 11-year high

Unemployment in Britain skyrockets to 1.3 million as UK economy shrinks amid no-deal Brexit fears, while wage growth hits 11-year high.

UK unemployment rose by 31,000 to hit 1.3 million in the second quarter of 2019, representing a 3.9% increase, as the prospect of a no-deal Brexit and shrinking economy begin to impact the labour market.

‘June may have marked high tide in the labour market,’ UK economist at Capital Economics Andrew Wishart said. ‘Demand for workers has cooled on the back of softer economic activity.’

However, wage growth in the UK reached a 11-year high over the first six months of the year, with the employment rate reaching its joint highest level since 1971, according to data from the Office of National Statistics (ONS).

In fact, UK wage growth rose by 3.9% in the year to June, with the employment rate hitting 76.1%, the ONS said.

UK labour market reaching a ‘turning point’

Some economists argue that the data suggests that Brexit and a weakening UK economy is beginning to take its toll on the British labour market.

‘While real earnings growth has now returned to pre-referendum rates, the labour market appears to be reaching a turning point, with unemployment no longer falling, the number of job vacancies no longer increasing and companies and workers deterred from bigger employment decisions by Brexit and global uncertainties,’ Economist at the National Institute of Economic and Social Research Arno Hantzsche said.

Learn how political events have historically impacted financial markets with IG.

British labour market ‘reaching its peak’

According to ONS figures, the increase in UK employment to a record high of 32.8 million in the second quarter of the year was driven primarily by a sharp rise in the number of part-time jobs.

Meanwhile, those in full-time positions fell, though the employment rate remained unchanged at 76.1%.

‘With investment in machinery and technology often deemed too risky right now, businesses have sought to bring on board more staff to help lift output,’ Chief economist at the Institute of Directors Tej Parikh said. The labour market ‘may now be reaching its peak,’ he added.

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