Concern as Britain's employment figures shrink slightly

Britain's three-month average unemployment rate was unchanged at 4.8 percent in October, figures released on Wednesday show, but there was a surprise fall in employment.

The drop in employment of 6,000 in the three months to October revealed in the Office for National Statistics (ONS) figures, countered expert consensus which expected a growth of 50,000 jobs.

The continued solidity of the employment market was expected -- and is in line with other major developed nations such as Germany (4.1 percent), and the United States (4.8 percent) -- but the fall in employment figures has surprised to the downside, and is the first fall since the second quarter of 2015.

"Today's UK labour market figures revealed some clearer signs that the recent resilience is fading," said Paul Hollingsworth, British economist at Capital Economics.

The steadiness of the unemployment rate of 4.8 percent was down to a rise in inactivity, and a more accurate impression of the labor market is shown in the monthly November unemployment figures, which rose 2,400.

Business is worried over the future state of the labor market as it enters 2017, a year likely to be characterised by uncertainty over Brexit declaration and ensuing negotiations with the European Union (EU). These may weigh heavy on business.

Suren Thiru, head of economics at the industry representative body British Chambers of Commerce said: "There are signs that the UK labor market may be beginning to cool, with a small fall in employment and the continued rise in the claimant count measure.

"It is likely that UK unemployment will start to drift upwards in the coming months, as uncertainty over Brexit and the increasing input costs faced by businesses weigh on jobs growth."

Thiru said the BCC expected unemployment to rise over the coming year, peaking in early 2018 at 5.5 percent. Although this is a significant rise, it is still well below the long-term average.

In simultaneously released figures, wage growth continues strongly, remaining above CPI inflation (1.2 percent for November).

The annual growth rate in three-month average weekly earnings including bonuses rose from 2.4 percent to 2.5 percent.

However, most forecasters anticipate that the sharp fall in sterling on foreign exchange markets since the June 23 Brexit vote -- contributing to a 16 percent fall in the pound against the dollar -- will feed through to increased prices through higher import costs and increased prices of commodities, which are frequently priced in dollars.

Elizabeth Martins, economist at HSBC, said that the future upward trajectory of inflation was a worry. If it overhauled wage growth inflation would impact on consumer spending which is currently driving the British economy.

"We are worried about the impact of rising inflation. CPI inflation yesterday came in higher than expected, rising to 1.2 percent year-on-year in November, from 0.9 percent in October. The impact of sterling weakness appears to be feeding through, and not just to petrol but also -- according to the November numbers at least -- to food, clothing and computers."

Martins said she believed inflation would outpace nominal wage growth, hitting real incomes and bearing down on consumption. Endit