The unemployment rate in the United Kingdom unexpectedly increased to 3.9% in the three months leading up to March as more individuals actively sought
employment, potentially alleviating inflation concerns at the Bank of England (BoE).
Economists surveyed by Reuters had anticipated the rate to remain steady at 3.8%.
The news prompted a decline in the value of the pound against the US dollar and the euro as investors adjusted their expectations regarding the possibility of the BoE pausing its series of interest rate hikes at its upcoming meeting in June. Rate futures indicate a likelihood of approximately 30% for such a pause.
According to preliminary data from the UK's tax office, the Office for National Statistics (ONS) reported the first decline in the total number of employees on payrolls in over two years, with a decrease of 136,000 individuals in April compared to March.
Additionally, job vacancies experienced their tenth consecutive decline in the three-month period up to April, reaching their lowest level since mid-2021.
Despite these developments, wage growth, which plays a crucial role in the BoE's deliberations on further interest rate increases, remained strong when compared to historical standards. Basic pay rose by 6.7% in the three months leading up to March, slightly accelerating from a 6.6% increase in the three months to February.
The economists surveyed by Reuters had expected a slightly higher growth rate of 6.8% for basic earnings.
The increase in wages was driven by a faster growth rate in the public sector workforce's earnings.
Annual pay growth, including bonuses, remained at the expected rate of 5.8% according to the Reuters poll.
Darren Morgan, the director of economic statistics at the Office for National Statistics, noted that the return of individuals to the workforce or actively seeking employment was primarily driven by men. However, he also highlighted that the number of individuals unable to work due to long-term illness reached a new record high. Photo by Jim Goldsmith, Wikimedia commons.