UK Unemployment Rate Unexpectedly Dips to 4.3% in July

The U.K. unemployment rate unexpectedly dipped to 4.3% in July, a new 42-year low, after 4.4% in June. However, the good news was more than offset by soggy earnings figures, with the average household income coming in at a nominal growth rate of 2.1% y/y in the three months to July, unchanged from the prior month’s figure but below the median forecast for a tick higher to 2.3% y/y.

The wages data show that a high employment/low unemployment levels are not translating into higher incomes. With yesterday’s inflation data showing headline consumer price index running at 2.9% y/y, aggregate wages in the U.K. remain firmly in negative growth.

There are many theories about why wages are lagging, including the impact of the gig economy, “competition” from automation, and weakening of labor unions.

Either way, the data suggest that the key consumer sector will remain relatively soft, and with it the U.K. economy in relative stagnation. This hasn’t been lost on markets. Sterling has lost just over 30 pips versus the dollar in the wake of the data release.

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