U.K. unemployment rate declines to lowest in a decade, indicates recovery in labor market

The unemployment rate in the United Kingdom declined to its lowest level in a decade, indicating that the country’s labor market is showing signs of improvement post the Brexit referendum that shook financial markets.

U.K.’s unemployment rate stood at 4.8 percent in the third quarter of the year, compared with 4.9 percent in the preceding three-month period, data released by the Office for National Statistics showed Wednesday.

The employment rate remained at a joint record-high of 74.5 percent, the data showed. Supported by falling unemployment, wages rose by 2.4 percent from a year earlier, in line with analysts' expectations. Over the year since September 2015, the number of people from the other, 27 members of the bloc working in Britain rose by 221,000.

However, average-earnings growth stayed at 2.3 percent in the three months through September, though the rate excluding bonuses picked to 2.4 percent from 2.3 percent. The pressure on real wages is expected to intensify, with some economists predicting inflation could reach almost 4 percent next year as the 12 percent fall in the pound since the Brexit vote drives up import costs, Bloomberg reported.

In addition, real wages grew just 1.7 percent in the third quarter, matching the slowest rate since February 2015, while output per hour rose just 0.2 percent in the third quarter, compared with a 0.6 percent increase in the previous three months.

Meanwhile, the Bank of England (BoE) has said that it is prepared to tolerate consumer prices above its 2 percent target for the time being. However, much will depend on whether cost pressures in the labor market remain subdued.