Rise in UK unemployment fuels labour market jitters

Number of people in work was 63,000 lower and while employment rose most of the jobs went to non-UK citizens

Unemployment in the UK has risen for the second consecutive month. Photograph: Getty

Fears that the improvement in Britain’s labour market has stalled have been fuelled by a second successive month of job losses.

Official data showed that the number of people in work was 63,000 lower in the three months to June than in the previous quarter, while the number unemployed rose by 25,000.

Employment rose over the past year but most of the jobs went to non-UK citizens. The number of non-UK nationals working in the UK increased by 257,000 to 3.1m while the number of working UK nationals rose by 84,000 to 27.7m.

David Freeman, statistician at the Office for National Statistics, said: “This is now the second consecutive time we’ve reported fewer people in work on the quarter. While it’s still too early to conclude that the jobs market is levelling off, these figures certainly strengthen that possibility.”

The pound fell after the release of the ONS data as traders pushed back their expectations of the timing of an increase in interest rates from the Bank of England.

The state of the labour market is one of the most important indicators looked at by Threadneedle Street’s monetary policy committee and the current figures point to falling demand for jobs, fewer hours being worked, and little evidence of a surge in pay inflation.

Unemployment on the internationally agreed measure rose to 1.85 million between April and June while the number employed dropped to 31.03 million. The jobless total was still 221,000 lower in the second quarter of 2015 than in the same three months a year earlier, according to the ONS.

Regular pay for employees stood at £463 a week in June, up 2.8% on a year earlier. The annual growth rate was unchanged on the previous month. Total pay including bonuses was £488 a week, with the growth rate dropping from 3.2% to 2.8%.

Jeremy Cook, chief economist at World First, the international payments company, said: “The jobs recovery in the UK looks to have paused somewhat in the past few months, but we remain optimistic that is a temporary blip in June.

“Reports from the services, construction and industrial sectors have all shown that employment has continued to increase but at a slowing rate – a natural function of a tightening labour market.

“Wage growth is solid but not spectacular and can only be seen as such in light of the poor inflation outlook in the UK. It certainly seems unlikely that wages are in any position to materially drive consumer price inflation higher through the remainder of the year just yet.”

Samuel Tombs, UK economist at Capital Economics, said: “The latest UK labour market figures showing a fall in employment and weaker wage growth support the consensus view on the MPC that interest rates do not need to rise before the end of the year.”