The UK’s unemployment rate fell to its lowest since the early 1970s this summer even as the economy stalled, according to official data that will bolster policymakers’ concerns that a labor shortage is fueling inflation.
The Office for National Statistics said Tuesday that the unemployment rate fell to 3.6 percent in the three months to July, down 0.2 percentage points from the previous quarter and the lowest level since 1974, but this was not due to an increase in the number of workers. The employment rate also fell 0.2 percentage point to 75.4 percent.
Instead, there was a new jump in the number of people who said they were not working because they were studying or had a long-term health condition — raising the economic inactivity rate by 0.4 percentage points to 21.7 percent, higher than its previous rate. epidemic level.
Andrew Bailey, Governor of the Bank of England, has warned that a shrinking workforce will make price and wage pressures more persistent, and the latest figures will strengthen the case for the central bank to continue to tighten monetary policy aggressively at next week’s meeting to make a decision delayed by the Queen’s death.
The data showed that wage growth strengthened in the three months to July, with average total wages, including bonuses, 5.5 percent higher than the previous year.
But Yael Selvin, an economist at KPMG, said that would be “little consolation” for workers whose salaries have been squeezed by rising inflation, with total wages down 2.6 percent in real terms and normal weekly earnings down 2.8 percent.
There were also signs that the economic downturn was starting to make employers more cautious about hiring new employees, with the number of job openings dropping to 1.26 million in the three months to August – still very high by historical standards, but the biggest drop since the early stages of the pandemic in 2020.