By Wiktor Szary and Paul Hannon
LONDON--The U.K.'s unemployment rate fell to its lowest in over a decade in the three months through September, official data showed Wednesday, suggesting the labor market has held up well following Britain's June decision to leave the European Union.
The drop is welcome news to the Conservative government, which is due to lay out its tax and spending plans on Nov. 23. Prime Minister Theresa May, who has said she would start the two-year divorce proceedings with the EU early next year, told Parliament on Wednesday the figures"show the strength of the fundamentals" of the U.K. economy.
The upbeat figures came a day after Google, a unit of Alphabet Inc., unveiled plans to build a new headquarters in London, a move hailed by Philip Hammond, the Treasury chief, as "a big vote of confidence," which could bring as many as 3,000 new jobs.
The unemployment rate fell to 4.8% in the third quarter from 4.9% in the preceding three-month period, the Office for National Statistics said. Analysts polled by The Wall Street Journal had predicted no change.
The employment rate remained at a joint record-high of 74.5%, the ONS said. Supported by falling unemployment, wages rose by 2.4% from a year earlier, in line with analysts' expectations.
Despite the upbeat headline readings, the data also offered some signals that the labor market may be starting to cool, government statisticians said.
The number of people in work grew by 49,000 in the three monthsthrough September, a figure that disappointed analysts.
The claimant count rose by 9,800 in October, while the figure for September was revised up to 5,600, significantly more than the 700 initially estimated.
"There are still clear risks ahead for the U.K. labor market and we may be starting to see early signs of a more sustained fall in hiring," said James Smith, developed markets economist at ING in London.
Investors are paying close attention to how the U.K. labor market is faring after the Brexit referendum. Combined with a widely-anticipated upsurge in inflation, rising unemployment would likely have an adverse impact on consumer spending, a key driver of the British economy, hurting its growth prospects.
There have been limited signs of that, so far, with retail sales growing strongly in the immediate aftermath of the referendum, though this was driven in part by the weakened pound which lured overseas tourists into British shops. Retail sales data for October are due to be published later this week.
The ONS also said there were few signs that the June vote had led to an exodus of workers from other EU countries. Over the year since September 2015, the number of people from the other 27 members of the bloc working in Britain rose by 221,000.
"The referendum outcome and subsequent devaluation of sterling has had little impact so far on the number of EU workers in the U.K. labor force, " said David Freeman, an ONS statistician.
Write to Wiktor Szary at Wiktor.Szary@wsj.com and Paul Hannon at firstname.lastname@example.org
(END) Dow Jones Newswires
November 16, 2016 10:23 ET (15:23 GMT)
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