UK unemployment declines below 5% for first time since 2005

Britain's unemployment rate fell to 4.9 per cent in the three months through May, according to a report released on July 20, 2016.
Britain's unemployment rate fell to 4.9 per cent in the three months through May, according to a report released on July 20, 2016.PHOTO: REUTERS

LONDON (BLOOMBERG) - The United Kingdom labour market showed continuing strength ahead of the country's decision to vote to leave the European Union.

The unemployment rate fell to 4.9 per cent in the three months through May, the lowest since the third quarter of 2005, the Office for National Statistics in London said on Wednesday. Economists in a Bloomberg survey had expected the rate to stay at 5 per cent. The number of people in work rose 176,000, the most this year, to a record 31.7 million.

There was a mixed picture from wage data, with basic pay growth unexpectedly slowing to 2.2 per cent from 2.3 per cent. Total earnings increased 2.3 per cent, up from 2 per cent.

All the data were collected before June 23, meaning they don't reflect any impact on the economy from the Brexit vote. With measures of consumer and business sentiment weakening since the referendum, Bank of England officials are debating whether they need to provide support with a fresh round of stimulus.

Key to policy makers' deliberations will be the outlook for the labor market and its implications for inflation. The BOE's Monetary Policy Committee said last week that wage growth had "picked up somewhat in the months ahead of the referendum." Official Martin Weale this week cited strengthening wages, along with weak productivity, as perhaps an argument against cutting interest rates.

Joblessness in the UK dropped by 54,000 to 1.65 million in the latest three months. In May alone, the jobless rate was at 4.8 per cent.  Jobless benefits, a narrower measure of unemployment, rose 400 in June and the rate was at 2.2 per cent. In May, claims increased 12,200 instead of the 400 drop previously estimated. The ONS said the revision was largely due to data on universal credits.