ONS reports mixed news, with rising economic inactivity but fewer claiming unemployment benefit in three months to October

This article is more than 3 years old

This article is more than 3 years old

Employment in Britain has fallen for the first time in a year in a half in a sign that the UK jobs market is losing steam following the EU referendum.

The employment rate edged lower to 74.4% in the three months to October, from a record high of 74.5%, according to the Office for National Statistics (ONS). It was the first drop since February to April 2015, triggered by a 6,000 fall in the number of people in work to 31.76 million.

Meanwhile, the number of people claiming unemployment benefits rose by 2,400 in November to 809,000.

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“This is the first genuine disappointment we have seen in the hard data since the Brexit vote,” said Alan Clarke, UK economist at Scotiabank.

John Philpott, an employment expert and director of The Jobs Economist, said a rise in public sector jobs was not enough to offset a fall in private sector employment.

“The UK labour market finally appears to be suffering a bout of post-Brexit vote blues, which is now hitting recruitment. The UK labour market looks to have entered a somewhat slower time,” he said.

The latest official report on Britain’s jobs market was mixed, with unemployment down 16,000 over the three months to 1.62 million and the jobless rate unchanged at 4.8%.

Average pay growth picked up more than expected to 2.6%, or 2.5% excluding bonuses, from 2.4%. But the number of people of working age considered “economically inactive” – out of work and neither seeking nor available to work – jumped by 76,000 over the period to 8.9 million.

Damian Green, the work and pensions secretary, highlighted the fact that the jobless rate remained at the lowest in more than a decade.

He added: “This year will be remembered as one when so many records were made – employment has consistently been running at an all-time high with more women, older workers and ethnic minority groups in work than ever before.

“But there is more to do to help people of all backgrounds and abilities into work, which will remain a priority as we press ahead with our welfare reforms that are ensuring it always pays to be in work.”

But the ONS said its figures suggested the UK employment market was softening.

David Freeman, a senior statistician, said: “The labour market appears to have flattened off in recent months. While the employment rate remains high, it is slightly down on the record set recently. Meanwhile, a small fall in unemployment on the quarter was more than offset by a rise in economic inactivity.”



Economists including those at the Bank of England have warned that 2017 would be tougher for UK workers and consumers. Unemployment is expected to rise as the broader economy slows and businesses grapple with higher costs and waning demand.

Commenting on the latest ONS figures, Suren Thiru, the head of economics at the British Chambers of Commerce, said: “It is likely that UK unemployment will start to drift upwards in the coming months, as uncertainty over Brexit and the increasing input costs faced by businesses weigh on jobs growth. However, while we currently forecast the unemployment rate will peak at 5.5% in early 2018, this is still well below the long-term average.”

Higher inflation is expected to squeeze household finances at a time of weak wage growth.

Inflation data published on Tuesday showed the headline annual rate rose to 1.2% in November from 0.9% in October. It was the highest level in more than two years, driven higher by clothing and petrol prices, in a sign that the fall in the value of the pound since the Brexit vote is fuelling a rise in the cost of living.

Inflation is expected to rise sharply in 2017, to about 3%, further squeezing household finances. UK workers are only just recovering from a prolonged period of falling real pay during the financial crisis, when inflation was higher than wages growth for six straight years.

Rachel Smith, the CBI’s principal labour market adviser, said: “We see a mixed picture from the labour market over the last three months, with employment levels remaining more or less the same and unemployment seeing a slight drop.

“Although wage growth has gone up somewhat, so has inflation, hitting workers’ pay packets in real terms. Boosting productivity in every region and nation of the UK will be essential if firms are to further raise wages sustainably for their employees.”