LONDON (Reuters) – British job growth was the strongest in nearly a year in the three months to November, according to data that could weaken the case for an interest rate cut by the Bank of England next week.
Signs of weakness in job creation prompted two BoE rate-setters to vote for lower borrowing costs at the end of last year. Three others, including Governor Mark Carney, have said recently that more economic stimulus might be needed.
The BoE is due to announce its next rates decision on Jan. 30.
Tuesday’s reading showed the number of people in employment rose by 208,000 to 32.90 million, the biggest increase since the three months to January 2019 and much stronger than the median forecast in a Reuters poll for a rise of 110,000.
Sterling rose and British government bond prices fell after the data.
Thomas Pugh, an economist with consultancy Capital Economics, said the BoE’s Monetary Policy Committee was giving more weight than usual to the labor market to help it determine the state of the economy.
“As such, the rebound in employment and slightly softer pay growth will give the MPC another reason not to cut rates from 0.75% to 0.50% at their next meeting,” he said.
The Office for National Statistics said the strong jobs growth reflected a particularly weak three-month period to August when jobs fell, but the data also showed the employment rate hit a record high of 76.3% and jobs growth was driven by hiring as well as self-employment.
The number of people out of work dropped by 7,000 to 1.31 million and the unemployment rate of 3.8% remained at its lowest level since early 1975.
The data represented a snapshot of Britain’s economy before the Dec. 12 national election won emphatically by Boris Johnson. Since then there have been some signs of an improvement in consumer and business confidence.
Investors are waiting for Friday’s preliminary IHS Markit PMI surveys of businesses in January for a more comprehensive assessment of any change in the economy since the election.
The ONS said total earnings growth, including bonuses, rose by an annual 3.2%, the same pace as in the three months to October which was the slowest since September 2018.
Excluding bonuses, which smooth out some volatility, pay growth slowed a touch to 3.4%, the slowest since the three months to April 2019.
Economists had expected total pay to grow by 3.1% and regular pay to grow by 3.4%.
“While pay growth has eased since last summer, with inflation remaining subdued, earnings are continuing to increase in real terms,” ONS statistician David Freeman said.
Vacancies rose in the three months to December to 805,000 from 798,000 which was their lowest level since mid-2017.
Britain’s economy grew at its slowest annual pace in more than seven years in November, ONS data showed last week.
Many employers remain worried that uncertainty will continue this year because Prime Minister Johnson has ruled out extending a Brexit transition beyond the end of 2020, saying he will clinch a trade deal with the European Union by then.