The UK unemployment rate has fallen 0.3 percentage points to 3.5% in the three months to August 2022, 1 percentage point lower than pre-pandemic levels and its lowest point since 1974.
The number of unemployed people per vacancy also dropped to a record low of 0.9, which was better than forecast and mirrored the US’ latest data in which fewer vacancies have been added than feared.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, welcomed this data as “one chink of light”.
“Employment levels are an important forward-looking indicator when it comes to assessing the economy’s next move, and these figures offer some hope to the spending power of the UK consumer base,” she said.
On the surface a low unemployment rate may appear to be a positive, but the situation is far from ideal.
“With the overall number of people unemployed for between six and 12 months increasing in the quarter, we are still facing an uncertain situation,” Lund-Yates went on.
Not everyone was as bullish, however. According to Paul Craig, portfolio manager at Quilter Investors, this data should raise some concerns.
“The figures remaining this stubbornly low is actually too much of a good thing, as it is creating inflationary pressure in the economy,” he said.
And despite an average total pay growth of 6% in the third quarter, “workers will no doubt feel hard done by given inflation levels remain so high”.
For the sake of the current monetary policy, we should be hoping pay does not rise too quickly, but the cost-of-living crisis already has a firm hold on people’s finances and employers will be looked to for support as we navigate a difficult winter, concluded Craig.
“At present, most indicators continue to show strength in hiring, though we can expect the recent hit to business confidence, sentiment, and the harsh backdrop to begin biting in the coming months. While it may be too soon to start truly seeing this in the data, we are beginning to see a gradual slowdown in the recruitment frenzy seen in recent times and a reduced level of job advertisements as a result.”