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UK unemployment rises again but wage growth remains 'hot'

Published 14/05/2024, 09:15
© Reuters.  UK unemployment rises again but wage growth remains 'hot'

Proactive Investors - The UK unemployment rate rose for the third consecutive month, while average wage growth continued its recent run above the wider rate of inflation.

According to new numbers from the Office for National Statistics, the jobless rate climbed to 4.3% in March from 4.2% in February, as expected by economists.

Average weekly earnings rose 5.7% in the three months to March, higher than expected but the same as the revised number for the previous three-month period.

Excluding bonuses, wages remained up 6.0% as in the previous period.

Employment levels in the past three months fell to -178K in March, from -156K in February, better than the consensus forecast.

Timlier HMRC data for April showed payroll employee numbers fell 85K month-to-month in April, while March payroll employee numbers were revised up to a 5K month-to-month fall from an initial estimate of a 67K month-to-month fall.

ONS director of economic statistics Liz McKeown said the data showed further "tentative signs that the jobs market is cooling".

“At the same time the steady decline in the number of job vacancies has continued for a twenty-second consecutive month, although numbers remain above pre-pandemic levels."

The number of unemployed people per vacancy has continued to rise, approaching levels seen before the onset of COVID, she added.

Deutsche Bank (ETR:DBKGn)'s chief UK economist Sanjay Raja said the continued show signs of cooling "should spell good news" for the Bank of England's monetary policy committee.

"Private sector regular pay growth – while still elevated – came down a little more than the Bank of England was expecting at 5.9%," he said, but added that he still expect wage growth to "remain sticky" through the April period given the 10% hike to the National Living Wage.

"Equally, there are clear cut signs that the jobs market is normalising a little faster than previously expected. Indeed, the jobless rate registered its third consecutive monthly increase, rising to 4.3% in March-24. And more real time HMRC payroll data points to a cumulative drop of nearly 100k workers between February and May – another worrying sign.

"Altogether, today’s data should continue to give the green light for the MPC to cut rates as early as June, and gradually through the remainder of the year," Raja said.

But Rob Wood at Pantheon Macroeconomics said he was "sceptical that employment is falling rapidly as today’s labour market data would have us believe", expecting HMRC payrolls employment number to be raised as the March numbers were.

He "would also not take seriously" the figures showing a sharp employment drop "because sampling problems make the official labour market data less reliable than normal".

Read more on Proactive Investors UK


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