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British unemployment hits 45-year low

British unemployment hits 45-year low

LONDON, Sept 11: British unemployment has hit a 45-yearlow, official data showed Tuesday, but the economy still risks falling into adeep recession owing to Brexit turmoil, reports AFP. Here is an assessment of the economy and where it is heading, as Britainprepares to leave the European Union on October 31, with or without a dealaccording to Prime Minister Boris Johnson.How positive is the unemployment data? -Britain's unemployment rate eased in July to 3.8 percent, the lowest levelsince 1974, and down on 3.9 percent in June.Annual wages growth meanwhile climbed to 4.0 percent, the highest levelsince 2008, but skewed by bonus payments. On the surface, the data looks positive, but Britain's low unemploymentrate is not boosting productivity. Many workers are in part-time employmentor on "zero-hour contracts" offering no minimum guarantee of hours, sayanalysts. "Employment has been rising appreciably but growth has been lacklustre -so output per-hour worked has actually been falling," Howard Archer, chiefeconomic advisor to forecasters EY ITEM Club, told AFP on Tuesday."There may be an element of some companies taking on workers recently outof concern that with the labour market pretty tight and Brexit occurring,they may be unable to get the quality of workers they need in the future." Archer added that "while earnings growth has been rising over the pastyear, it still remains much cheaper and less risky in a highly uncertainenvironment to take on labour rather than invest."It is also much easier to reverse the taking-on of extra workers thanpulling the plug on an investment project if the situation deteriorates," hesaid. Where is the UK economy overall? Analysis of the health of Britain's economy can change quickly. Last week,experts reckoned on the country heading for recession this year even beforeBrexit, amid a global slowdown. However the outlook has changed for some after official data Monday showedthat UK economic growth grew by a better-than-expected 0.3 percent in July.Market experts still expect a severe downturn in the event of a chaotic EUdeparture. "The UK economy remains in a strong position, defying calls for arecession," Chris Beauchamp, chief market analyst at IG, said following thegross domestic product (GDP) update and after the latest "solid, ifunspectacular" jobs data. The pound, seen as a better indicator of the UK's economic health than theLondon stock market which is loaded with multinationals, continues to sufferBrexit-fuelled volatility. Sterling last week slid below $1.20 for the first time in nearly threeyears - reaching the lowest level since 1985 except for a 2016 "flashcrash". One of the biggest consequences of a weak pound has been to push up importcosts, which in turn has contributed to higher UK inflation.But while the Bank of England would ordinarily look to hike interest ratesto put a lid on rising inflation, Brexit uncertainty has caused it to sittight. Its key lending rate stands at just 0.75 percent. Supermarkets have meanwhile sought to avoid passing on their higher coststo consumers owing to strong price-competition across the sector.But small businesses are finding it harder to shield themselves, whileBritons heading abroad are facing costlier holidays. Deal or no-deal. While Britain may avoid falling into recession should it reach an exitdeal with the European Union, experts predict a dramatic slowdown in theevent of a no-deal. The Bank of England's latest assessment is for a slide in British GDP of5.5 percent following a no-deal Brexit.Unemployment would meanwhile surge to 7.0 percent and the annual inflationrate soar to 5.25 percent from a current 2.1 percent.

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