Britain’s jobs market has cooled further after the unemployment rate lifted to its highest level for nearly a year, but pay packages continue to outstrip inflation thanks to resilient earnings growth.
The Office for National Statistics (ONS) said the rate of UK unemployment rose to 4.3% in the three months to March, which is the highest since May to July last year and up from 4.2% in the previous three months.
In a further sign of that the employment sector is weakening, the ONS estimated that the number of UK workers on payrolls tumbled by 85,000 to 30.2 million in April – the largest fall since May 2020, although the ONS said this was subject to revision.
Despite this, the data showed regular average earnings growth remained unchanged at 6% in the three months to March, confounding expectations for a fall to 5.9%.
While this helped wages outstrip Consumer Prices Index (CPI) inflation by 2.4% – the highest since the three months to August 2021 – it is unhelpful for the Bank of England in its battle to rein in inflation.
It marked the second time in a row that the decline in earnings growth has failed to match forecasts.
Experts said the Bank will be looking at the next set of job numbers carefully, given last month’s near 10% rise in the National Living Wage, while it will also likely want to see further progress toward its target in the upcoming April inflation data.
Chris Beauchamp, chief market analyst at IG, said a cut in June was still uncertain.
“I think the latest data shows that we are still on the path to cut rates, but as we probably already know, not as quickly as many would like and in a very gradual way when it does come, June is still very much up in the air,” he said.
Others said a rate reduction next month was still on track, with Peter Arnold, EY UK chief economist, saying Bank rate setters would be encouraged by the ONS data showing private sector jobs growth edging down to 5.9% in the three months to March.
Experts said the latest jobs data showed the impact of interest rates remaining at their highest since 2008, at 5.25%.
It added that the number of people classed as economically inactive rose to 9.4 million in the first three months of 2024 – up 1.1% quarter-on-quarter and 3.3% higher than a year earlier – while there were also 178,000 fewer people overall employed quarter-on-quarter, at 33 million.
Chancellor Jeremy Hunt said: “This is the 10th month in a row that wages have risen faster than inflation, which will help with the cost-of-living pressures on families.
“While we are dealing with some challenges in our labour supply, including pandemic impacts, as our reforms on childcare, pensions tax reform and welfare come online I am confident we will start to increase the number of people in work.”
But economists remain cautious over the ONS data, as the statistics body continues to overhaul its labour force survey due to low response rates, with the full revamped version not due to be introduced until September.
