Official data showed that British employers ramped up their hiring at the fastest pace since 2015 in the three months to January as the labour market defied broader Brexit weakness in the overall economy. The number of people in work surged by 222,000, helping to push the unemployment rate down to its lowest since the start of 1975 at 3.9 per cent.
The increase in hiring was stronger than all forecasts in a poll of economists and pushed the proportion of the population in work to an all-time high. The pound rose slightly after the data.
The surprising resilience of the labour market and the subsequent rise in wage growth, plus a fall in inflation, are cushioning the Brexit uncertainty for many households, whose spending drives the economy. However, the surge in jobs could reflect nervousness among businesses who have scaled back on investment in equipment, making them more likely to hire workers who can be sacked if the economy sours.
An employers group said that companies were set to cut investment by the most in 10 years in 2019 because of Brexit, even if Prime Minister Theresa May gets a deal to ease the country out of the European Union. “There is continued strength in the labour market but we all know that it is a lagging indicator and we shouldn’t get too carried away,” Commerzbank economist Peter Dixon said.
“There have to be questions about how long the labour market can continue at this pace.” The Bank of England forecasts that Britain’s economy will grow at its slowest rate in a decade this year. Private surveys have suggested employers turned more cautious in February as May struggled to get parliament behind her deal. Brexit is now expected to be delayed beyond the scheduled date of March 29.
Firms in Britain’s dominant services sector cut staffing at the fastest rate in more than seven years in February, according to a purchasing managers’ survey published two weeks ago.