Jobs and spending fears add to economy's EU referendum blues

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A “cooling” jobs market, rising uncertainty and a new squeeze on households have deepened the UK economy’s pre-EU vote woes.

Official figures revealed a 44,000 rise in employment in the three months to March — 409,000 ahead of last year but a marked slowdown in the recent rapid improvement in the jobs market.

Office for National Statistics statistician David Freeman said the “quite modest” advance in employment was “further evidence the jobs market could be cooling off”, although the unemployment rate remained steady at 5.1%.

The jobs figures come after recent signs of weakness in April industry surveys as global weakness combined with worries over the outcome of next month’s referendum to sap UK growth.

The Bank of England, whose Governor Mark Carney warned of the “possibility” of a technical recession last week, underlined the uncertainty facing the economy in the latest reports of its agents. They reported easing output growth “in part reflecting the effects of increased uncertainty on business services activity”.

The agents’ report added: “There was some evidence of businesses delaying investment expenditure decisions on account of the uncertainty around the outcome of the EU referendum.”

There was little to stir the Bank’s Monetary Policy Committee from its inactivity on rates as policymakers try to untangle “Brexit” effects from the economy’s underlying performance.

Financial data firm Markit’s monthly snapshot puts household finances in their weakest position for nearly two years due to rising cost pressures and weak pay growth. Barely one in five households now expect a rate hike in the next six months, Markit added. 

Experts are pinning hopes on a post-Brexit bounce following a stay vote. Capital Economics’ Paul Hollingsworth said: “Assuming that the UK does vote to ‘remain’ next month, we should see a bit of a bounce-back in economic activity later this year, and as such the recovery in jobs and earnings are likely to pick up some pace again.”

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May 18, 2016 |
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