News & analysis

UK labour market data has come in fairly solid, with headline Average Weekly Earnings, including bonuses, beating expectations to reach an 11-year high.

The details of the report showed:

  • Average Weekly Earnings including bonuses were up 4.0% in the three months ended July, compared to a year earlier. The Bloomberg median forecast was 3.7%, last month’s rate of 3.7% was revised upwards.
  • Excluding bonuses, Average Weekly Earnings were up 3.8% by the same measure, vs 3.7% forecast and a previous read of 3.9%.
  • The UK unemployment rate fell to 3.8% vs 3.9% forecast and 3.9% previous.

The UK labour market remains in good shape by any reasonable metric, and in particular, the sustained wage growth we are seeing will support consumer spending, likely dragging the economy as a whole back into growth in the third quarter.

The figures showed the UK labour market remains in very good shape, despite Brexit risk having frozen business investment in the economy.


The employment rate was the joint highest since records began in 1971, headline average weekly earnings grew at their fastest annual rate since 2008, and real wages were up a solid 1.9%.

The Bank of England prefers to look at wage growth excluding bonuses, but the headline figure is significant as it suggests businesses remain willing to pay bonuses to retain staff in a tight labour market.  Interestingly, the ONS noted that the bump in year on year AWE growth including bonuses was due to fewer bonuses being paid in March, and more being paid in May-July. This could be due to companied delaying discretionary payments due to the Brexit uncertainty in March.

The only blemish in the report is the continued downward trend in vacancies, which have been falling since the beginning of the year and suggest the labour market is unlikely to “overheat”.

Timing effects may have contributed to the bump in year on year AWE including bonuses, but this is nonetheless a strong set of jobs figures that show wage growth has the potential to remain a support for consumer spending during a period of worsening political uncertainty.

The good labour market figures, unfortunately, are beside the point for sterling, which continues to trade almost entirely on Brexit risk.



Author: Ranko Berich, Head of Market Analysis at Monex Europe.