UK Unemployment Drops to 4.7% and Payrolls Rebound, Boosting Case for Bank of England Rate Hike

The United Kingdom's labor market delivered a broad upside surprise in August, with the ILO unemployment rate falling to 4.7% against forecasts of 4.9% and a prior reading of 4.9%. Employment rose by 102,000 in the three months to August, far exceeding the consensus estimate of just 5,000 and the prior gain of 66,000, while payrolled employees increased by 13,000 on the month against an expectation of an 8,000 decline and a prior revised figure of 1,000.

Wage growth was a mixed but still elevated picture. Average weekly earnings rose 3.7% in the three months to August on a year-over-year basis, just below the 3.8% estimate and down from 3.9% previously. Earnings excluding bonuses also came in at 3.7%, a tick above the 3.6% estimate and up from a revised 3.6% prior. Private sector earnings excluding bonuses grew 3.0%, matching estimates and edging above the 2.9% prior reading. Jobless claims rose by 30,300, above the prior revised reading of 7,000, and the claimant count rate held steady at 4.4%.

The data strengthened expectations that the Bank of England will raise its key interest rate at its November meeting, with Deutsche Bank among those calling for a hike following the release. Bloomberg noted the figures bolster the case for further tightening, and the WSJ reported the combination of falling unemployment and firmer wage growth raises the likelihood of action next month, just ahead of the government's budget.