Comment: Unemployment drops to its lowest reading since 1975

“Recent labour market figures from the Office for National Statistics show that the unemployment rate dropped to 4.0% in the three months to June, the lowest reading since 1975. At the same time, the number of vacancies rose to a new all-time high and the number of people on so called zero hours contracts fell to 780,000, down from 884,000 one year earlier.

‘Today’s data release is certainly good news for the British economy and highlights the healthy state of the labour market. Unfortunately, ultra-low unemployment rates do not translate into buoyant consumer spending at the moment, also because of real wage growth having slowed down in the second quarter, leaving households with no pay increases once inflation is taken into consideration. Given the elevated levels of uncertainty caused by Brexit, lower corporate investment is holding back productivity growth (which has been the Achilles’ heel of the British economy since the financial crisis) and despite the low unemployment rate, we continue to remain generally pessimistic about the UK’s economic outlook for the rest of the year.”

By Markus Kuger, Senior Economist at Dun & Bradstreet