Unemployment rises in Scotland
Sluggish wage growth casts doubt over rate rise
Mark Carney: interest rate dilemma
Slow wage growth has put a question mark over next week’s interest rate decision as the Bank of England ponders the effects of a further squeeze on household income.
Wage growth figures show total earnings including bonuses grew at 2.2% in the three months to August.
The pound slipped as the data highlighted the squeeze on consumer’s pay and followed a fall in sterling yesterday after publication of higher inflation figures.
The data coincided with the latest employment figures showing the number out of work in Scotland sitting at 4.1%, up 0.3% but below the UK rate of 4.3% which is a 42-year low.
The UK figure showed a 94,000 rise in employment and 52,000 fall in unemployment.
Matthew Percival, CBI head of employment, said: “Persistently weak productivity, coupled with falling real wages, continues to hit living standards, underlining the need for the Chancellor to bold in his Budget.”
UK unemployment is at a 42-year low and Scotland is outperforming the UK
Russ Mould, investment director at AJ Bell, said: “This leaves the Bank of England with a dilemma as the Monetary Policy Committee prepares to meet on 2 November.
“Governor Mark Carney’s strong hints at a first rate rise since 2007 do not square with prior announcements that an acceleration in wage growth would be a key trigger for tighter monetary policy.
“While any increase in pay packets is always welcome, that modest rise is not enough to offset inflation.
“The debate over whether the Bank of England will raise rates on 2 November will therefore remain as fierce as ever.
“Mr Carney’s (and the Bank’s) credibility are on the line after the latest hints that a hike in headline borrowing costs may be imminent, especially as similarly hawkish rhetoric has led nowhere on more than one occasion previously, while the economic data remains mixed and the outcome of the Brexit talks uncertain.”
There were 1.2% more people in work in Scotland over the previous quarter and a 7.5% rise in the number in self-employment over the past year.
Official figures show 35,000 joined the Scottish workforce in the last three months and more than 2.5 million people aged 16 years and above now in work in Scotland.
SNP MSP Ivan McKee said: “Today’s job figures are encouraging – showing that Scotland has both higher employment and lower unemployment rates than the UK as a whole.
“Over the last quarter, fewer young people were out of work in Scotland than in the UK and the female employment rate increased to 72%, against a UK rate of 70.7%.”
Dr Stuart McIntyre of the Fraser of Allander Institute said the latest labour market data show robust employment in Scotland.
“These data represent some good news for the Scottish economy with continued growth in the employment rate. Nevertheless, the relatively fragile economic growth experienced over the past two years in Scotland remains a concern, as do wider indicators of the health of the economy.
“In addition, with inflation spiking to 3% and weak wage growth, there will continue to be a drag on household consumption going forward.”
Scottish Labour’s economy spokesperson Jackie Baillie MSP said: “These figures should make sobering reading for both the Tory and SNP governments.
“Unemployment is up and wages continue to fall. Coupled with rising inflation, this means working people in Scotland are being left worse off.
“This is unacceptable and once again shows the SNP is asleep at the wheel when it comes to managing our economy.
“Labour would use the powers of the Scottish Parliament to invest in our economy and scrap the public sector pay cap.
“Meanwhile, the Tories bungled approach to Brexit is making a mockery of any claims they are the party who can be trusted on the economy.”