The UK economy continues to create jobs, but at a slower rate than we have become accustomed to in recent months. By Ben Brettell, Senior Economist, Hargreaves Lansdown: 

46,000 more people were in employment in the quarter to August than the previous quarter – the smallest increase for over a year. This was still enough to push the unemployment rate down to a five and a half year low of 6.0 percent, however. More jobs and lower unemployment is clearly good news, but the lack of wage growth remains a thorn in the side of an otherwise fairly robust recovery. A year-on-year increase in earnings of 0.7 percent is nothing to write home about, and remains considerably below the rate of inflation. Many economists predict that we will see wage growth start to come through over the next twelve months or so, but this has been the forecast for a while and it is yet to materialise. The weakness in wages reflects subdued productivity, which has been hamstrung by a lack of capital investment.

The silver lining is that this allows the Bank of England to leave interest rates on hold. Given the growing threats to our economy posed by the prospect of recession in the euro zone and geopolitical concerns, the Bank will be reluctant to risk an interest rate rise at present. The absence of inflationary pressure – both in prices and wages – makes holding interest rates at 0.5 percent a straightforward decision, and as such this week’s data may have come as something of a relief for Mark Carney and his colleagues.