UK Unemployment Rate Rises Unexpectedly; Wage Growth Slows

(RTTNews) - The UK unemployment rate increased unexpectedly in January, while the softening of pay growth soothed fears of inflation building up, data published by the Office for National Statistics showed on Tuesday.

The ILO jobless rate rose to 3.9 percent in the three months to January from 3.8 percent in the prior period. The rate was seen unchanged at 3.8 percent.

At the same time, the employment rate came in at 75.0 percent.

Average earnings excluding bonus gained 6.1 percent in the three months to January. The rate was forecast to climb 6.2 percent, the same rate as seen in the preceding period.

Including bonus, earnings increased 5.6 percent, slightly slower than economists' forecast of 5.7 percent and 5.8 percent increase in the December quarter.

Although the easing in wage growth is probably still a bit too slow for the Bank of England's liking, there are encouraging signs that a more marked slowdown is just around the corner, Capital Economics' economist Paul Dales said.

This suggests that an interest rate cut in June is possible, the economist added.

The Bank of England had maintained its interest rate for the fourth consecutive time last month and kept the door open for the rate cut this year. At 5.25 percent, the bank rate is the highest in 15 years.

"With wages continuing to outpace inflation, alongside high levels of economic inactivity - including long-term sickness, the picture for businesses trying to recruit remains challenging," Jane Gratton, deputy director for public policy at the British Chambers of Commerce, said.

"Overall, the labor market is still much tighter than it was before the pandemic, and the long-term structural issues it faces have yet to be addressed," Gratton added.

Data showed that the estimated number of vacancies declined 43,000 sequentially to 908,000 in three months to February. Vacancies decreased for the 20th consecutive period.

Pay-rolled employment increased by 20,000 on month to 30.4 million in February.

Data showed that claimant count increased by 16,800 from the previous month to 1.585 million. In January, there were 203,000 working days lost due to labor disputes.