Unemployment edges higher as job market cools - ONS

14th May 2024 07:02

(Sharecast News) - Unemployment nudged higher in March, official data showed on Tuesday, in line with expectations, despite wages continuing to grow.

According to the Office for National Statistics, the UK unemployment rate was estimated to be 4.3% in January to March, up from 4.2% previously.

The claimant count also rose in April, by 8,900 on the month and 29,300 on the year, to 1.58m.

The number of payrolled employees fell by 5,000 between February and March, although it rose by 288,000 year-on-year.

The early estimate for payrolled employees for April decreased by 85,000 on the month. Year-on-year it nudged 0.4% higher, to 30.2m.

Job vacancies continued to decrease, meanwhile, down 26,000 on the quarter to 898,000.

The data also showed an increase in average earnings, however, despite the cooling jobs market.

The annual growth in employees' average regular earnings, excluding bonuses, was 6% in January to March. Including bonuses, growth held steady at 5.7%. Analysts had expected it to slow to 5.5%.

With inflation now falling, the Bank of England has left rates on hold on hold at 5.25% since August.

A cut is expected this year, but Tuesday's wage data could see the Monetary Policy Committee push back the timing.

The UK economic inactivity rate was 22.1%.

Danni Hewson, head of financial analysis at AJ Bell, said: "[BoE governor] Andrew Bailey made it clear that rate setters would be carefully considering the array of economic data barrelling our way between this month's BoE decision and the next meeting in June.

"Today's figures do little to move the dial, with the market continuing to cool but wage growth coming in hot.

"Getting inflation down to 2% is only one part of the task the BoE is facing. The harder bit will be keeping it down, as the impact of the huge energy shocks we felt last year finally wash through the system."

Ashley Webb, UK economist at Capital Economics, said: "While the further easing in regular private sector pay in March suggests that wage pressures faded a bit faster than the BoE expected, broader measures of wage growth are probably still a bit too strong from the Bank's liking.

"At the margin, this may make the BoE a bit more uneasy about first cutting interest rates in June."

Neil Wilson, chief market analyst at Markets.com, said: "All else equal, this should be great for the consumer, with real wage growth continuing to run at levels that we have not seen in years.

"We should caution though that the UK data right now cannot be relied upon. The wage growth data may be flattered by the minimum wage increase in April, and the rise in unemployment points to a general cooling in the labour market that ought to be supportive of rate cuts."