UK unemployment rises, but wage growth beats Reuters forecast

By David Milliken

LONDON (Reuters) – Britain’s unemployment rate rose unexpectedly in the three months to February, but wage growth remained above expectations, highlighting the Bank of England’s dilemma over time to decide whether to raise interest rates further.

The Office for National Statistics said the unemployment rate rose to 3.8 percent – its highest level since the second quarter of 2022 – instead of staying at 3.7 percent, as economists had predicted in a Reuters poll.

Annual wage growth for the three months through January was revised down to 5.9% and it held steady at that level for the three months through February, well above the 5.1% forecast in a Reuters poll. Excluding premiums, wage growth has held steady at 6.6%.

“Wages continue to grow more slowly than prices, so incomes continue to fall in real terms, even though the gap between public and private sector income growth continues to narrow,” said Darren Morgan, ONS statistician.

UK consumer price inflation reached a more than 40-year high of 11.1% in October, and was still in double digits in February.

The Bank of England expects inflation to be less than 4% by the end of the year, due to lower wholesale energy prices, but financial markets see an 80% chance of higher energy costs. Debt meeting for its 12th consecutive meeting next month, at 4.5% from 4.25%.

Wage pressures are a major concern for the central bank, and while unexpectedly rapid wage growth will be a concern, you may take some comfort in some indications from Tuesday’s data that the pace of labor market inflation is easing.

The rate of economic inactivity in Britain decreased by 0.4 percentage points from the previous quarter to 21.1%, its lowest level in the three months to May 2022, while the number of vacancies decreased by 47 thousand to 1105 million, the lowest level in three months to August 2021, Although it is still 304,000 higher than it was before the pandemic.

“While optimism has increased that the UK economy will avoid a recession this year, we continue to see the labor market lose steam,” said Jack Kennedy, economist at job site Indeed.

He added that in addition to the decrease in employment opportunities according to the data of the National Statistics Office, data had already shown that companies were less willing to offer employment bonuses to employees than they were at the end of last year.

(Reporting by Sachin Ravikumar; Editing in Spanish by Benjamin Mejias Valencia)