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Britain’s unemployment rate has fallen to its lowest level since 2005 but evidence of softening wage growth will raise worries about the longevity of the UK’s consumer driven economic expansion in the wake of the Brexit vote.
Official monthly figures from the Office for National Statistics show the jobless rate fell to 4.7 per cent from 4.8 per cent in the rolling three months ending in January – defying forecasts of no change and underlying the UK’s impressive job creation since the financial crisis.
However, in a worrying development for the future health of the economy, the pace of wage growth softened to the lowest since April 2016.
Average weekly earnings growth, including bonuses, softened to 2.2 per cent from 2.6 per cent in the previous three month rolling period, lower than a forecast of 2.4 per cent.
Household spending has been driving the UK economy in the wake of the referendum with the Office for Budget Responsibility now expecting higher inflation to eat into disposable income and lead to moderate growth over the next four years.
Average inflation is forecast to climb above the Bank of England’s 2 per cent target this year, peaking in 2018 following the softening in the pound after the referendum.
Ahead of the UK’s impending exit from the EU, where the government is seeking to restrict inward EU migration, the ONS found a dip in EU nationals working in the UK to 2.24m from 2.26m.
The ONS said there were 315,000 more people in employment at the start of the year compared to the same period last year – taking the total size of the labour force to 31.85m and the employment rate to the joint highest on record at 74.6 per cent.
Unemployment meanwhile dropped by 31k from the previous three month period and is down 106k from a year earlier.
“Job creation has been fairly solid in recent months although it is worth noting that the latest figure is still well below the pace seen in the earlier stages of 2016″ said James Smith at ING. “Surveys suggest firms will reduce hiring as Brexit uncertainty persists”.