Unemployment benefit claims in the United Kingdom have unexpectedly fallen in July after the decision of the country to leave the European Union, which suggests that the Brexit vote is not having an immediate impact on the labor market.
The month experienced only a slight decrease in the number of jobs employers opened for people, but even with the decrease, benefit claims went down by 8,600 as opposed to June’s data that reported an increase of 900, according to the Office for National Statistics on Wednesday.
Economists polled by Reuters expected benefit claims to increase by 9,500 in response to the uncertain and volatile market conditions after Brexit showing warning signs that the economy is in a downturn.
The report is the first official measure of Brexit’s effect against the labor market since the vote on June 23. Furthermore, the ONS showed that job creation remained strong just before the referendum.
“The labor market data for July — the first ‘hard’ figures since referendum – suggest that the economic recovery is slowing, but do not give a resounding recession signal,” said Samuel Tombs, economist at Pantheon Macroeconomics as he noted the decrease in vacancies.
The value of the British pound gained briefly on Thursday against the dollar and the euro, but the gain was quickly wiped away.
According to a survey published August 5 from a group that represented the recruitment industry, July saw employers cutting hiring as permanent jobs filled by staffing firms decreased at its fastest pace since 2009.
The Bank of England is expecting a sudden rise in unemployment in the next few years in the aftermath of the volatility and uncertainty caused by Brexit prompting it to slash interest rates to 0.25 percent at the beginning of the month while taking other measures to cushion the economy as it faces pressure.
Unemployment benefit data gathered on July 14 was done three weeks after the decision to leave the EU, which may not reflect the real impact of the post-Brexit drop in hiring. A delayed impact might also come from the laws in Britain that require employers to give notice to workers they intend to lay off.
According to the ONS, vacancies in the three months ending in July went down by 7,000 to 741,000. Tombs of Pantheon Macroeconomics suggested that a sign of a recession would mean a decrease in vacancies by over 20,000.
The unemployment rate in Britain remained steady in the three months up to June at 4.9 percent, meeting expectations of analysts.
April to June wage growth slightly increased after the introduction of a higher minimum wage bill in April.
Unemployment numbers fell to 1.641 million down by 52,000 as the number of working individuals increased to 31.750 million up by 172,000, pushing the employment rate up to a record high of 74.5 percent.