Rate rise unlikely in wake of employment fall
The latest official figures from the government also showed the headline three-month average rate of annual growth in average weekly earnings eased from 3.2% to 2.4% in June.
Samuel Tombs, senior UK economist at Capital Economics, said: “The latest UK labour market figures showing a fall in employment and weaker wage growth support the consensus view on the Monetary Policy Committee that interest rates do not need to rise before the end of the year.
“Admittedly, the 4,900 monthly fall in the claimant count measure of unemployment in July and the robust level of the employment surveys suggest that jobs growth will return to positive territory soon.
“And the slowdown in wage growth largely reflected volatility in bonus payments – the headline rate excluding bonuses held steady at 2.8%.
“Nonetheless, all indicators suggest that the rate at which slack in the labour market is been used up has eased significantly, indicating that the economic recovery is now being largely fuelled by productivity not employment growth.”
Tombs said these figures imply that output per hour might have risen by about 1% q/q in the second quarter.
He added: “Reviving productivity means that current rates of pay growth are still too weak for the MPC to judge that CPI inflation is likely to return to the MPC’s 2% target over the medium term.”
Work and pensions secretary Iain Duncan Smith said: “Our one nation government is helping millions across the country to succeed and achieve their full potential. I was particularly pleased to see that wages are continuing to rise – meaning that hardworking people will see a real difference in their pay packets.”