The number of people in work fell by the largest margin in four years in August as the uncertainty created by the Brexit talks weakened Britain’s previously robust labour market.
The employment figures dropped by 56,000 in the three months to the end of August from the previous quarter after a shake-out of high street retail jobs and redundancies across much of the manufacturing sector.
Unemployment increased back to 3.9% of the working population from 3.8% in the previous quarter to reflect growing signs that the jobless total is about to begin a sustained rise from its previous 40-year lows.
A recent surge in pay also came to an end in August after average weekly earnings dropped, from 4% to 3.8%. Pay including bonuses also increased at 3.8%. Annual total pay growth, adjusted for inflation, was put at 1.9%, with annual growth in regular pay estimated at 2%.
Another indication of the worsening situation could be found in the falling number of vacancies, which dropped for an eighth month in a row from the January peak of 861,000 to 813,000 in August.
The International Labour Organisation (ILO) jobless rate is a measure of unemployment adopted in a number of countries to reflect the state of the labour market. It is expressed in percentage terms, as a proportion of working-age people who are out of work but want a job and are actively looking for one.
The ILO rate is used by the Office for National Statistics to measure unemployment in Britain. The precise definition of people who are counted are those without a job who have been actively seeking work in the past four weeks and are available to start work in the next two weeks. It also includes those who are out of work but have found a job and are waiting to start it in the next two weeks.
Chris Williamson, chief business economist at IHS Markit said: “The disappointing numbers are not a blip but the consequence of a steady deteriorating trend seen over the course of 2019 so far. What’s more, the business surveys indicate that the job market continued to weaken in September, hinting that the rate of job losses likely accelerated.”
Figures from the Office for National Statistics (ONS) covering the last year were more buoyant as the employment rate rose to 75.9% from 75.6%.
According to the ONS, much of the rise was down to women over 60 staying in the workforce following the new state retirement age.
The annual data covering number of people considered to be economically inactive fell 0.2 percentage points from last August to an estimated 21%, although the worsening situation in the three months to August meant it was up 0.1 percentage points on the previous quarter.
Ian Stewart, chief economist at Deloitte, said a slowdown across production and trade was filtering into the labour market.
“These numbers show that the period of remarkable resilience in jobs and earnings is coming to an end. Next year is likely to see unemployment edge higher, albeit from very low levels – the first sustained increase in nine years,” he said.
Jon Boys, labour market economist at the CIPD, the professional body for personnel managers, said: “Today’s statistics will certainly prompt more speculation that the labour market has reached its high-water mark.
“Employment numbers may be down on the last period, but it’s worth repeating that they remain just below record levels. The labour market is still in good health.”
The figures follow a report by the TUC that showed that between 2016 and 2018 pay rises were more generous among the very top earners.
It found that people in the top bracket saw their hourly pay increase by an average of 7.6% from £58.73 in 2016 to £63.18 in 2018, according to the Office for National Statistics (ONS) annual survey of hours and earnings. Over the same period, the real terms pay of average workers rose by just 0.1% or 2p to from £12.71 to £12.73.
In line with previous studies by the New Economics Foundation and the Institute for Fiscal Studies, the TUC said that average pay in real terms, when adjusted for inflation, was still worth less in real terms than before the financial crisis.
