UK labour market continues its remarkable resilience

Ben Brettell, Senior Economist, Hargreaves Lansdown, takes a look at the latest figures.

Just how low can it go? Unemployment fell again in the three months to March, to 3.8% – the lowest rate since 1974. Wage growth weakened slightly, but remains robust, with pay excluding bonuses rising 3.3%, down from 3.4% a month earlier.

The UK labour market has been remarkably resilient in the face of Brexit-related uncertainty. These are really strong numbers given the headwinds the economy is currently facing.

But the ‘British disease’ of low productivity is a spectre which continues to haunt us. There are valid concerns that UK firms are hoarding labour instead of much-needed capital expenditure. Why would you invest large sums in new plant or machinery in such uncertain times, when you could hire an extra worker and get broadly the same result? The ONS report today says that output per hour declined in the first quarter, the third quarterly decline in a row.

The market reaction to the numbers was almost non-existent – the FTSE continues to be largely driven by global factors, and sterling was broadly unmoved.

Economic data at the moment provides ample justification for the Bank of England’s wait-and-see approach to monetary policy – so no changes to interest rates are likely at the MPC’s next meeting on 20 June.