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Record employment holds up in face of shrinking UK economy

Tom Belger
Finance and policy reporter
The setting sun is reflected in the office buildings of the City of London. Photo: Ben Stansall/AFP via Getty Images

Britain’s jobs boom is holding up despite growing fears for the UK economy, with figures showing employment at new record highs.

The number of people in work in the UK increased by 32,000 to another record-breaking peak of 32.75 million in the three months to April.

The employment rate remained unchanged at 76.1%, the joint-highest figure since records began in the early 1970s, according to figures released by the Office for National Statistics (ONS) on Tuesday.

Unemployment stood at 3.8% between February and April, another record figure and the lowest since 1974.

The rising number of jobs comes despite growing gloom about the economy, with the Bank of England recently predicting growth will remain subdued and total retail sales dropping by 2.7% in May.

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The new numbers come a day after shock GDP figures showed Britain’s economy had shrunk by 0.4% in April, the biggest fall in more than three years.

The bleak figures on Monday sent the pound downwards, as economists had predicted a far more modest contraction of 0.1%.

The ONS said manufacturing had been particularly hard, with a “dramatic fall” in car production as firms shut down operations for a no-deal Brexit that never came and stockpiling came to an abrupt halt.

But the latest wage figures on Tuesday showed average weekly earnings have also increased over the past year by 3.4%, albeit with the figure in real terms adjusted for inflation at 1.5%.

The ONS said a tighter labour market would normally push up wages, but uncertainty in the economy could be limiting such pressures.

“Wages dodged the Brexit bullet again in April,” according to Emma-Lou Montgomery, associate director for Personal Investing at Fidelity International.

“Unemployment also continued to fall, which is surprising given the reports of job losses in both retail and manufacturing over the past month,” Montgomery said.

READ MORE: Why the OECD says Britain shouldn’t brag over record employment

Fears of the impact of global trade tensions and a no-deal Brexit under a new prime minister are weighing on the economy.

Bloomberg Economics had predicted a small drop in jobs and easing of pay growth, but expected unemployment to remain at last month’s 44-year low of 3.8%.

But it said the loss of momentum “reflects sampling volatility,” rather than the labour market “cracking under the pressure of Brexit uncertainty.”

Britain has seen employment levels growing significantly in recent years, despite expectations that Britain’s imminent departure from the EU would batter the labour market.

Some economists believe many firms are hiring because it is cheaper and less risky than making major long-term investments, which have fallen.