Above expectations strong UK wage growth supports Sterling

The number of the unemployment benefits seekers increased by 8.7K in August after upwardly revised 10.2K in July, keeping the UK unemployment at a four-decade low of 4.0%.
The UK wages rose above forecast by 2.9% over the year in three months ending in July after bonuses were excluded while up 2.6% y/y including bonuses.
Sterling is supported by increased Brexit optimism and strong UK labor market, even as the Bank of England is unlikely to act on the Bank rate after August rate hike.

Mario Blascak, PhD Independent Analyst

The UK labor market remained strong in August with claimant count rising 8.7K in August while the number of the unemployment benefits seekers was revised upwards to 10.2K in July. The unemployment rate in the Uk though remained stuck to 4.0%, representing the lowest level since December 1974-February 1975 three-month average.

The strength of the UK labor market has been pronounced especially in wage growth with the wages including bonuses rising 2.6% over the year in the three months to July period while wages excluding bonuses increased at the same period by 2.9% y/y. Both wage growth measures accelerated 0.1% and also by 0.1% exceeded the market forecast in support of Sterling that has been boosted on Monday by Brexit optimism.

The average regular pay (excluding bonuses) for employees in the UK was £489 per week before tax and other deductions from pay, up from £475 per week at the same time a year ago.

The average total pay (including bonuses) for employees in the UK was £520 per week before tax and other deductions from pay, up from £504 per week at the same time a year ago.

Strong UK labor market report was indicated also by the recent report from Markit Economics in cooperation with the Recruitment & Employment Confederation that saw UK wages driven higher by the UK labor market tightness.

“Jobs are being created and starting salaries are rising. There are big opportunities out there for
candidates right now looking for a new role,” Neil Carberry, chief executive at Recruitment & Employment Confederation compiling the employment situation data wrote in the report on Friday last week.

Carberry acknowledged the risk to the UK labor market stemming from unclear Brexit deal saying that companies are starting to implement contingency plans now – and those who aren’t will need to step up progress.

UK nominal wage growth

Author

Mario Blascak, PhD

Independent Analyst

Dr. Mário Bla&scaron;čák worked in professional finance and banking for 15 years before moving to journalism. While working for Austrian and German banks, he specialized in covering markets and macroeconomics.

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