UK Jobless Rate Falls; Wage Growth Remains Strong

(RTTNews) - The UK unemployment rate fell to the lowest since the middle of 2021 but the wage growth remained strong in three months to April, adding weight to the view that the next Bank of England interest rate cut will be in August.

The unemployment rate rose to 4.4 percent in the three months to April from 4.3 percent in three months to March, the Office for National Statistics reported. The rate was forecast to remain unchanged at 4.3 percent. The 4.4 percent is the highest since mid-2021.

The employment rate was estimated at 74.3 percent in February to April period.

In the three months to April, average earnings excluding bonus grew at a steady pace of 6.0 percent from the previous year, as expected.

Average earnings including bonuses also logged a stable growth of 5.9 percent, which was faster than economists' forecast of 5.7 percent.

Although UK wage growth remained strong in the three months to April, the unexpected rise in unemployment rate is likely to limit the future pay increases.

In May, payroll employment decreased 3,000 from the prior month to 30.3 million, data showed.

Further, vacancies declined on the quarter for the 23rd consecutive period. The number of vacancies fell by 12,000 to 904,000.

The number of working days lost because of labor disputes totaled 17,000 in April.

In May, the claimant count rose to 4.3 percent in May from 4.1 percent in the previous month. The number of people claiming benefits increased 50,400 from April.

"This month's figures continue to show signs that the labor market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong," the ONS said.

The stickiness of wage growth may not stop the Bank of England from cutting interest rates for the first time in August, provided other indicators such as pay settlements data and next week's CPI inflation release show decent progress, Capital Economics' economist Ruth Gregory said.

ING economists' James Smith also said the BoE is on track for a rate cut in August, assuming services inflation proves less surprising next week.

The BoE's monetary policy announcement is due on June 20. The bank has left its key policy rate unchanged for the sixth consecutive meeting in May. At 5.25 percent, the current bank rate is the highest since early 2008.

The KPMG/REC Report on Jobs, released on Monday, showed that starting pay for candidates increased in May amid reports of a competitive market landscape, alongside evidence of a ripple impact on base pay rates following increases in the national minimum and living wages.

That said, both permanent and temporary staff pay grew at a slightly slower pace than seen in April.