UK pay growth rises to 11-year high, job creation beats forecasts

LONDON (Reuters) - Britain’s labour market showed unexpected strength in the second quarter, in sharp contrast with last week’s figures showing economic contraction over the same period as the country gears up for Brexit. Total earnings growth, including bonuses, rose by an annual 3.7% in the three months to June, official data showed, the highest rate since June 2008 and rising from 3.5% in May, and in-line with forecasts in a Reuters poll of economists. Excluding bonuses, pay growth picked up to 3.9% from 3.6%, the Office for National Statistics said, compared with the poll forecast for growth of 3.8%. A little of the strength in the pay data reflected the unusual timing of annual pay rises for public health workers in 2018, when a larger-than-usual increase was deferred until July. Britain’s labour market has been a silver lining for the economy since the Brexit vote in June 2016, something many economists attribute to employers preferring to hire workers that they can later lay off rather than making longer-term commitments to investment. The broader economy unexpectedly shrank by 0.2% during the three months to June, the first such fall since 2012. Nonetheless, Tuesday’s figures showed Britain created 115,000 jobs in the second quarter, bringing the level of employment to a record 32.811 million. However, the unemployment rate also rose to 3.9%, against expectations for it to hold steady 3.8%. Some recent surveys of companies have suggested employers are turning more cautious about hiring as new Prime Minister Boris Johnson has pledged to take Britain out of the European Union on Oct. 31, with or without a deal. Earlier this month the Bank of England said it saw signs of a softening in labour market indicators.