Unemployment in the U.K. fell in the three months through July, a sign the British labor market held up well in the aftermath of the country’s June 23 vote to leave the European Union.
The Office for National Statistics said Wednesday the number of people out of work in Britain declined by 39,000 May through July, pulling the unemployment rate down to 4.9%, the lowest level since the third quarter of 2005, and compared with 5% in the previous three months.
The number of people in work rose to a record high of 31.8 million, the ONS said.
The official labor market survey adds to signs the British economy has largely weathered the initial shock of the referendum result. A recent run of data suggests output recovered in August after briefly stumbling in July. Official retail sales figures for August are due Thursday, and a preliminary estimate of third-quarter growth will be published in late October.
The Bank of England is on Thursday expected to keep its benchmark interest rate steady after cutting it to a new low in August. The central bank launched a package of stimulus measures to cushion the economy and financial markets from the Brexit vote.
Despite the apparent resilience in the labor market, many economists have expressed caution over the outlook. The August unemployment figure includes data from May and June–the run up to the Brexit vote–which “most corporates” expected to result in the U.K. staying in the 28-country bloc, said James Knightley, an economist at ING in London. It also takes time for businesses to digest and act on shock outcomes like the Brexit vote, Mr. Knightley said.
“We expect to see softer jobs growth in coming months while wage growth is unlikely to accelerate, with businesses set to act cautiously on pay given the economic uncertainty,” he said in a note.
The Bank of England said in August that it expects hiring to slow over the coming months, as the uncertainty surrounding the U.K.’s future trade arrangements weighs on business investment.
Alongside the fall in unemployment, Wednesday’s jobs report offered some mixed signals. The ONS said Wednesday the number of people claiming out-of-work benefits rose in August, by 2,400, the second monthly increase in a row. However, the number of job openings also increased.
Investors are paying close attention to how the U.K. labor market is faring in the wake of 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.
But data published earlier this week by credit-card company Visa showed household expenditure was broadly flat on the year in August, with face-to-face purchases declining at the fastest rate in over three years.