UK Wage Growth Rises Above Forecasts As Unemployment Levels Increase

This morning saw UK unemployment unexpectedly rise by 0.1 percentage points to 3.8%. This marks the highest level of unemployment since Q2 2022 with a further 49,000 people out of work. This marks the first rise in unemployment from 3.7% since October and suggests that the heat of the UK labour market may be beginning to ease – though wage growth would suggest otherwise. Recently, the heat of the UK labour market has been evident with unemployment levels close to record lows while job vacancies have remained close to record highs. Moreover, a recent study earlier this year suggested a worker shortfall of 330,000 people due to Brexit related restrictions, thus exacerbating shortfalls in the UK labour market which will continue to weigh on investor’s medium to long-term view of the UK economy.

Tomorrow, all eyes will be looking towards UK CPI which is expected to slip 0.4 percentage points to 10%. Last month, the UK’s inflation print indicated that headline CPI unexpectedly rose from 10.1% in January to 10.4% in February against market forecasts that UK inflation would fall from double digits for the first time since August. The 0.3 percentage point increase from January bucked the trend of a falling rate of inflation seen each month since November and reiterated the challenge that the BoE faces in bringing inflation back to their 2% target rate. As we await the UK’s CPI Print, in the run up to Threadneedle Street’s decision on 11th May, according to a Bloomberg news survey more than half of economists now think the BoE will not from raise its key rate again.