Britain’s unemployment rate increased for the first time since late 2020, while other indicators of the country’s hot labor market cooled, perhaps alleviating inflation concerns at the Bank of England, which is set to boost interest rates again this week.
With rising prices impacting on the economy’s recovery from the COVID-19 epidemic, official statistics revealed that the unemployment rate increased to 3.8 percent in the three months to April from 3.7 percent in the previous labor market report for the three months to March.
This was the first gain since the latter three months of 2020. Reuters surveyed economists, who predicted the jobless rate to decline to 3.6 percent.
The increase was partially due to a decrease in the economic inactivity rate for working-age individuals, which measures persons who have dropped out of the labor market entirely and therefore do not show up as jobless.
It declined by 0.1 percentage point to 21.3 percent from February to April, owing mostly to students looking for jobs.
“We may be nearing a turning point for the labour market as creeping uncertainty results in employers taking their foot off the accelerator,” said Jack Kennedy, an economist at the employment website Indeed.
Although job openings have decreased, they have reached a new high, and the drop in the inactivity rate has kept it substantially above pre-pandemic levels, indicating that the labor market is highly tight, according to Kennedy.
Sterling fell against the dollar after the release of the data, and shorter-maturity British government bond rates fell from multi-year highs as investors reduced their expectations for how much higher the BoE is likely to boost borrowing costs.
The Bank of England is anticipated to hike interest rates again on Thursday in an effort to prevent the recent spike in inflation from becoming a longer-term issue if firms are forced to boost pay significantly to fill vacancies.
Data released on Monday indicated that the British economy fell unexpectedly in April, fueling concerns of a dramatic recession. more info
In the three months to April, 177,000 more people were employed than in the previous three months, above the Reuters poll’s median prediction of a 105,000 gain, while the number of jobless declined by 47,000.
Employment declined by 254,000 in April, and the unemployment rate rose to 4.2 percent from 3.5 percent in March, albeit single-month data may be unpredictable as a barometer of the economy.
Despite forecasts that it would drop, regular pay growth increased slightly to 4.2 percent in the three months to April, according to statistics released on Tuesday. However, overall pay growth, including incentives, dropped to 6.8 percent from 7.0 percent.
Many firms have used one-time incentives to recruit and retain employees.
Despite relatively high levels of wage growth, workers’ salaries are being eroded by the recent surge in inflation induced by the global economy’s reopening after the coronavirus outbreak and Russia’s invasion of Ukraine.
Using the British consumer price index, real-terms total pay was 0.5 percent lower than a year ago, the worst dip since August 2020, when many staff were on reduced furlough pay.
Pay declined 3.0 percent after bonuses, the greatest such inflation-adjusted reduction since November 2011.
Looking only at April – which the ONS discourages because of the small number of employees examined – pay excluding bonuses fell by the greatest since records started in 2001.