James Knightley, Senior Economist at ING, notes that the UK employment continues to rise and job vacancies are high, but uncertainty is creeping in and firms are cautious for 2017.
“The UK labour report shows that the jobs market remains in decent shape despite the Brexit uncertainty. Employment rose 106,000 in the three months to August while the number of people classifying themselves as unemployed has increased 10,000. This means that the unemployment rate has remained at 4.9% for the fourth consecutive month.
The jobs market is likely to remain robust in coming months with the number of job vacancies staying close to cycle highs at 749,000. Given that there are only 776,000 people claiming unemployment benefit in the UK the labour market appears fairly tight and this partly explains why wage growth is holding up fairly well (in addition to the introduction of the national living wage). Average weekly earning both including and excluding bonuses are rising 2.3%YoY, which is above the 1% increase in the cost of living (CPI).
We remain worried about the outlook for 2017 given hiring intention surveys have deteriorated. Employment growth is likely to slow and we suspect that the Brexit related uncertainty will make firms reluctant to offer significant pay rises. At the same time, sterling weakness will continue to push up price inflation, meaning household spending power is sharply eroded. This raises downside risks for consumer spending through 2017-18.”