U.K. Employment Jumps as Economy Defies Brexit Political Turmoil

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The U.K. economy created jobs at an impressive pace in the fourth quarter, defying the political turmoil over Brexit.

The number of people in work rose a larger-than-forecast 180,000, leaving the jobless rate at a four-decade low of 3.8%, the Office for National Statistics said Tuesday. The numbers will likely reinforce speculation that the Bank of England will refrain from cutting interest rates this year.

The jump came in a quarter that saw a second Brexit deadline missed and Prime Minister Boris Johnson forced to hold a general election to break the parliamentary deadlock. His emphatic victory eased uncertainty, helping the economy avoid contraction after better-than-expected growth in December.

In addition to a pickup in activity since Johnson’s win, the government is preparing to unveil a large fiscal stimulus next month to bolster growth. The pound was little changed after Tuesday’s jobs data.

Risks remain, however. Johnson has ruled out extending the Brexit transition period beyond Dec. 31, even if no trade deal is in place.

What Our Economists Say:

“The big job gain and an unemployment rate below 4% is a strong rebuttal of the case for easing by the Bank of England, particularly with a fiscal boost on the way..”

--Dan Hanson. For the full U.K. REACT, click here

The latest snapshot of the labor market suggests conditions remain tight.

Vacancies, which have been falling, rose by 7,000 in the three months through January and employment in the fourth quarter hit a record high, driven by full-time employees. Women accounted for over 80% of employment growth and now make up almost half of the total.

Adjusted for inflation, regular pay climbed above the pre-crisis peak reached in 2008. Total earnings slowed in the fourth quarter, with regular pay rising 3.2% on the year and wages including bonuses gaining 2.9% -- the slowest since 2018. However, they are still outpacing inflation of less than 2%.

Productivity, which has languished since the financial crisis, rose 0.3% from a year earlier on an output per hour basis, its second straight quarterly gain.

The number of European Union nationals employed in the U.K. rose by 36,000 from a year earlier, or 1.6%, in the quarter before Britain left the bloc.

(Updates with Bloomberg economist comment.)

To contact the reporters on this story: Andrew Atkinson in London at a.atkinson@bloomberg.net;Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson

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