U.K. Wage Squeeze Continues Amid Low Unemployment

By Wiktor Szary and Jason Douglas Features Dow Jones Newswires

The U.K.'s labor market remained robust in the three months through April, data showed Wednesday, but wages after inflation fell again, highlighting a continued squeeze on Britons' wallets.

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The decline in real wages is a worrying sign for future growth of the British economy, which relies heavily on domestic demand. Growth already slowed more sharply than first thought in the first quarter as consumer pared back spending.

The unemployment rate in U.K. in the February-April period held steady on the previous three months at 4.6%, the lowest since mid-1975. The number of people in work rose by 109,000 to hit almost 32 million, the highest level on record, the Office for National Statistics said Wednesday.

But adjusted for inflation, average earnings in the three months through April fell on the year by 0.6%, marking the second straight month of decline. Data Tuesday suggests the squeeze continued into May: consumer prices rose 2.9% on the year in May, the fastest annual rate of inflation for almost four years.

The concerns about economic growth come amid heightened political uncertainty linked to this month's parliamentary election, which failed to return an outright majority, and the coming exit negotiations with the European Union.

Prime Minister Theresa May, who had called the election seeking to strengthen her parliamentary majority ahead of the talks, formalized Tuesday a loose alliance with Northern Ireland's Democratic Unionist Party that will keep her weakened government in power.

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Write to Wiktor Szary at Wiktor.Szary@wsj.com and Jason Douglas at jason.douglas@wsj.com

(END) Dow Jones Newswires

June 14, 2017 04:49 ET (08:49 GMT)