British unemployment unexpectedly slumped in September

UK unemployment just keeps on falling.

It touched 5.3% in September, according to official figures released on Wednesday.

Analysts expected the unemployment rate for September, which takes the average of that month and the two that preceded it, to come in at 5.4% again.

The rate fell to 5.4% in August, when analysts were expecting it to stay at 5.5% — similarly, it fell to 5.5% in July, when analysts were expecting it to hold at 5.6%.

Average weekly earnings, on the other hand, were a little weaker than expected, rising by 2.5% in comparison to the same month last year.

In August, average weekly earnings excluding bonus payments rose by 2.8%, a shade less than the 2.9% growth seen in July.

Weekly earnings figures are watched extremely closely for a couple of reasons. Firstly, rising earnings are a sign that the labour market is getting closer to full capacity — when employers have to compete more to find the right workers, pay tends to rise.

Secondly, strong wage growth strengthens overall inflation figures. Since the Bank of England targets inflation, the stronger wage growth is, the more likely people are to expect a coming hike in interest rates.

After years of negative real wage growth, where pay rose by less than overall inflation, workers are getting a bit of a boost — consumer prices aren’t rising at all at the moment, with inflation bumping around 0%.

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