British employers hired many more workers than expected in early 2018, a tentative sign that the economy's weak start to the year may be temporary, as the Bank of England hopes. Employment rose by 197,000 during the first quarter, the biggest jump since late 2015 and far exceeding the 130,000 consensus expectation of a Reuters poll of economists.
The figures painted a familiar picture of strong growth in jobs and unemployment at its lowest rate in decades, but only a modest pick-up in pay for most British workers who have been hit by higher inflation since the 2016 Brexit vote. Sterling pared its losses on the day against the US dollar and British government bonds were little changed.
Annual growth in earnings, excluding bonuses, edged up to 2.9 percent in the three months to March, as expected in the Reuters poll. While this was the biggest increase since mid-2015, it represented only a 0.4 percent increase in pay in inflation-adjusted terms, the Office for National Statistics (ONS) said.
Including bonuses, total pay growth cooled to 2.6 percent from 2.8 percent in the three months to February, as expected. Last week the BoE left interest rates on hold, saying it wanted to be sure the economy was bouncing back after barely growing in the first quarter. In February it had said rates were likely to go up more quickly than it previously thought.
Economists said the strength of hiring in Tuesday's figures suggested Britain's economy did not have such a bad start to 2018 as portrayed by the preliminary official data. "Broadly, these data provide ammunition for the BoE's view that Q1 weakness was transitory and that the UK is operating at its speed limit," HSBC economist Elizabeth Martins said.
But the Resolution Foundation think-tank, which focuses on living standards, described the wage growth figures as underwhelming. The ONS published new figures for employment of foreign nationals and for productivity, a long-term problem for Britain's economy. Output-per-hour fell by 0.5 percent in the three months to March after a 0.7 percent rise in the fourth quarter of 2017, marking the biggest quarterly fall since late 2015 and denting hopes that British productivity was on the mend.
"The decline in UK productivity in the first quarter is a clear warning sign that positive real wage growth should not be taken for granted," Suren Thiru, head of economics at the British Chambers of Commerce, said. Less than a year before Britain is due to exit the European Union, the ONS said the number of EU nationals employed in Britain fell by 1.2 percent from a year ago to 2.292 million - the biggest drop in percentage terms for eight years.
"Labour supply looks set to fall further in the coming months, partly due to an abrupt plateauing in the number of EU citizens in employment in the UK," said Gerwyn Davies, senior labour market analyst at the Chartered Institute of Personnel and Development. The ONS published figures for the number of people claiming unemployment benefits - once a reliable early gauge of recession that has been undermined to some extent by changes to Britain's welfare system in recent years. Nonetheless, this showed a 31,300 monthly increase in the number of claimants - the largest rise since July 2011.
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