UK unemployment hits 1.33 million after rising by 31,000 in three months, official data shows

Jobless rate ticks up to 3.9 per cent in second quarter, but employment rate is steady and pay growth accelerates

(Getty)

Unemployment in Britain grew by 31,000 to 1.3 million between April and June and the jobless rate rose to 3.9 per cent, suggesting that worries about Brexit and the economy may be starting to take their toll on the labour market.

The unemployment rate increased for the first time since the middle of last year and vacancies, which have been declining since the turn of the year, dropped to 820,000 between May and July, according to official data.

Some analysts said the figures pointed to an emerging slowdown in what has so far been a healthy part of the economy.

But the data from the Office for National Statistics (ONS) also showed that wages rose at the fastest pace in 11 years.

“The labour market appears to be reaching a turning point, with unemployment no longer falling, the number of job vacancies no longer increasing and companies and workers deterred from bigger employment decisions by Brexit and global uncertainties,” said Arno Hantzsche, economist at the National Institute of Economic and Social Research.

Andrew Wishart, UK economist at Capital Economics, agreed: “June may have marked high tide in the labour market. Demand for workers has cooled on the back of softer economic activity.”

The ONS data showed that the number of people in work climbed to a record high of 32.8 million in the second quarter, driven by a rise in part-time jobs while the number of full-time positions dropped. However, the employment rate remained unchanged at 76.1 per cent.

Tej Parikh, chief economist at the Institute of Directors, suggested that some of the growth in jobs is linked to the current economic uncertainty.

“With investment in machinery and technology often deemed too risky right now, businesses have sought to bring on board more staff to help lift output,” he said, adding that the labour market “may now be reaching its peak”.

Last week, official data revealed that Britain’s economy unexpectedly shrank in the second quarter for the first time since 2012. That bodes ill for jobs as employment tends to adjust with a delay.

On Tuesday the ONS also said that pay growth accelerated. Total pay, including bonuses, increased 3.7 per cent in the April-June period compared with a year earlier, while growth in regular pay, which excludes bonuses, sped up to an 11-year high of 3.9 per cent.

The Resolution Foundation welcomed the faster increase in wages but said it expects pay growth to slow in the coming months, falling short of the pre-crisis average levels of 4 per cent.

“And the longer-term prospects for pay are being undermined by another fall in productivity. Output per hour of work fell by 0.6 per cent compared to the same period last year – the fourth consecutive quarter in which it has fallen year-on-year,” it noted.