UK Unemployment Rate Near 5-Year High

(RTTNews) - The UK unemployment rate reached a near five-year high and wage growth softened in the fourth quarter, strengthening the case for the Bank of England to cut interest rates in March.

The unemployment rate rose to 5.2 percent in the three months to December from 5.1 percent in the preceding period, the Office for National Statistics reported Tuesday. The rate hit the highest since early 2021 and also matched expectations.

Annual growth in employees' average earnings including bonus was 4.2 percent but weaker than the forecast of 4.6 percent and the 4.4 percent rise in the three months to November.

Earnings excluding bonus also grew 4.2 percent, which was in line with expectations.

In January, payroll employees decreased 11,000 from the previous month to 30.3 million. Data showed that the number of vacancies registered a small increase of 2,000 to 726,000 in the November to January period.

Earlier this month, the BoE had retained its benchmark bank rate at 3.75 percent, which was the lowest since early 2023. The bank has reduced the rate by 150 basis points since August 2024.

ING economist James Smith said today's job report keeps the BoE firmly on track for a March rate cut. He noted that lower wage growth should enable further rate cuts.

"We expect another cut in June, and we don't rule out the Bank taking rates even lower as it becomes more evident that inflation risks are subsiding," said Smith.

There are strong signs that the labour market is continuing to loosen, British Chambers of Commerce head of people and work policy Patrick Milnes said.

Milnes said it is unsurprising that employers are holding off hiring especially as the imminent introduction of new Employment Rights legislation adds additional complexity to the picture.