It was reported that Britain’s unemployment rate rose unexpectedly to the highest in six months as the number of jobs in the economy shrank, an indication that the once red-hot labour market.
The jobless rate rose to 4.2% in the three months through February from 4% in the period through January, the Office for National Statistics said Tuesday (April 16, 2024).
It was the highest since the summer of 2023.
The figures provided a tentative sign that inflationary pressures in the jobs market are cooling.
But the report also showed wage growth, which the Bank of England is watching carefully, remained stubbornly high, easing to 6%.
That was only slightly down from the 6.1% reading previously and above the expectations of economists.
“Weaker activity suggests wage growth will ease more rapidly before long,” said Paul Dales, chief UK economist at Capital Economics.
“If it wasn’t for the clear weakening in activity in the labour market, we’d be a bit worried that the UK’s disinflation process is grinding to a halt like in the US,” he said.
The policymakers have been reluctant to signal a shift away from their fight against inflation because of concerns that continued strong pay growth will fuel price rises.
Financial markets in recent weeks have scaled back bets on lower borrowing costs coming from the next two BOE meetings. Unexpectedly strong US inflation data and warnings from BOE hawks about similar risks remaining in the UK prompted the shift.
The pound fell as much as 0.3% to US$1.2409 after the report. Traders’ bets on BOE interest-rate cuts were little changed, with the market implying two quarter-point reductions by the end of the year.
The first cut is fully priced by September, with an 80% chance of an earlier reduction in August.
“Easing pressure in the labour market keeps the Bank on track for a summer rate cut,” said Yael Selfin, chief economist at KPMG UK.
“The rise in the unemployment rate paints a picture of a less tight labour market. The exact timing of the first rate cut will be a hot debate.” – Bloomberg
