UK labor market shows little sign of immediate Brexit hit

[August 17, 2016]  By William Schomberg and Andy Bruce

LONDON (Reuters) - The number of people claiming unemployment benefit in Britain unexpectedly fell in July despite the shock decision by voters to leave the European Union, suggesting little immediate impact from Brexit on the labor market.

Benefit claimants fell by 8,600 in the month, compared with an increase of 900 in June, and there was only a small fall in the number of jobs employers were trying to fill, the Office for National Statistics said on Wednesday.

Economists taking part in a Reuters poll had expected the number of claimants - a potential early warning sign of an economic downturn - to rise by 9,500 as employers responded to the uncertainty caused by the referendum.

The figures represented the first official measure of the labor market since the June 23 vote. The ONS data also showed the pace of job creation remained strong in the run-up to the referendum.

"The labor market data for July — the first 'hard' figures since referendum - suggest that the economic recovery is slowing, but do not give a resounding recession signal," Samuel Tombs, an economist at Pantheon Macroeconomics, said, pointing to the fall in vacancies.

The value of sterling rose briefly against the dollar and the euro. It later gave up those gains. [GBP/]

A survey published on Aug. 5 by a body representing the recruitment industry had suggested employers cut hiring in July as the number of permanent jobs placed by staffing firms fell at the fastest pace since 2009.

The Bank of England expects unemployment to rise sharply in the coming years as a result of the uncertainty caused by the Brexit vote. It cut interest rates to just 0.25 percent earlier this month and took other measures to cushion the economy.

DELAYED IMPACT?

The July claimant count figure was measured on July 14, three weeks after the referendum, meaning it might not reflect the full extent of any post-Brexit fall in hiring. British rules on how long employers must give notice to workers they intend to fire may also mean there is a delayed impact from the vote.

Builders work on a construction site in London, Britain August 17, 2016. REUTERS/Neil Hall

The ONS also said the number of vacancies in the three-month period to the end of July fell by 7,000 from the three months to the end of April to 741,000. Tombs of Pantheon Macroeconomics said a fall of more 20,000 vacancies would suggest a recession.

There was another sign on Wednesday that the immediate economic impact of the Brexit vote would not be as bad as some had feared.

Households recovered from a loss of confidence about their finances in August, a survey showed, suggesting consumers were taking the referendum result in their stride.

Much of the ONS data covered the labor market in the run-up to the referendum.

Britain's unemployment rate held steady in the three months to June at 4.9 percent, as expected in the Reuters poll.

Wage growth in the April-June period picked up slightly, reflecting the introduction of a higher minimum wage in April.

The number of unemployed fell by 52,000 to 1.641 million while the number of people in work rose by 172,000 to 31.750 million and pushing the employment rate at 74.5 percent, a latest record high.

(Editing by Jeremy Gaunt.)

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