Return to Insights

UK Wage Growth Rises Above Forecasts As Unemployment Levels Increase

UK Wage Growth Rises Above Forecasts

This morning has seen UK wage growth unexpectedly rise as markets weigh on the heat of the labour market in the run up to the UK’s inflation print tomorrow and the BoE’s rate hike on 11th May. Average weekly earnings, including bonuses in the UK, rose to 5.9% on an annualised basis – well above expectations of 5.1%. Meanwhile, average earnings excluding bonuses rose to 6.6%, surpassing forecasts of 6.2%.

This morning’s wage data has also again highlighted the gulf between the private and public sector with average regular pay being 6.9% for the former and 5.3% for the latter. This comes as the finance and business services sector’s regular growth rate came in at 8.3% as the construction sector’s also rose at 6.2%.

While these figures continue to signal that there is substantial heat in the UK labour market, total pay fell 3% when adjusted for inflation as the stretch on households continue to exacerbate the cost-of-living crisis.

UK Unemployment Rises Unexpectedly to 3.8%

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.

As investors await a string of corporate earnings data from the US and digest banking sector earnings, yesterday saw a modest rally in US equities. Here, the S&P 500 gained 0.33%, while the Dow Jones climbed 0.3%. Meanwhile the teach heavy Nasdaq rose just over a quarter-of-a-percent at 0.28%. This came as shares in Alphabet shed 2.7% following reports that South Korea’s Samsung Electronics is considering replacing Google with Bing (owned by Microsoft) as the default search engine on its devices. Meanwhile the STOXX 600 ended more or less flat as the index holds around one-year highs.

All Eyes on Tomorrow’s UK Inflation Print

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.


If you would like a PDF of this commentary, please contact us and we'll be in touch.

Contact us


Find out how we have helped our clients meet their hedging requirements.

Halifax Index: UK House Prices Fall for First Time Since 2012

According to the Halifax house price index, the price of residential property fell for the first time since 2012. The 1% depreciation between May 2022 and May 2023 came in line with expectations as analysts assess the impact of higher interest rates on households.

Nova Khakovka Dam Destroyed in Kherson, Ukraine

The vast Ukrainian Nova Khakovka Dam has been destroyed in the Russian occupied region of Kherson, Ukraine releasing a torrent of water as concerns for residents and nuclear power facilities up and downstream grows.

Think Tank Seeks Backing for UBI Trial

Plans have been unveiled for a Universal Basic Income (UBI) trial in the UK, with the think tank Autonomy currently seeking financial backing. It is hoped that the trial will span over two years with participants receiving £1,600 each month and being in control of how they spend or save the funds.

All Eyes on US Labour Market Data

Today all eyes are on US labour market data where the markets will be looking to gain an insight into the health of the US economy and the extent to which the jobs market is feeding into inflationary pressures ahead of the Fed’s meeting on 12 June.

House Passes Debt Ceiling Bill

Last night, the House comfortably passed the debt ceiling bill in arguably the most important stage in the process to ensure that the world’s largest economy averts a technical default. The House of Representatives cleared the Fiscal Responsibility Act by 314-117, the bipartisan deal assembled by President Joe Biden and House Speaker Kevin McCarthy.

Debt Ceiling Agreement to go to House Vote

Tonight, congress will vote on the bill agreed by President Joe Biden and House Speaker Kevin McCarthy, as the US tries to avert X-date by raising the debt ceiling. According to Reuters, “the deal caps federal spending and forces more poor people to work for food aid, concessions that Democrats hate. But it also preserves much of Biden's Inflation Reduction Act and punts the next debt ceiling showdown into 2025, which Republicans hate.”

Core, Blimey!

As markets weigh on the Bank of England’s interest rate decision on 22 June, this morning’s hotter-than-expected inflation print has seen investors upwardly revise rate hike expectations. Indeed, market reaction to this morning’s print is a further reaffirmation that inflation continues to be the hottest topic of conversation.

Erdogan Secures Another Five Years as Lira Plummets to Record Lows

The incumbent Recep Tayyip Erdogan has secured another five years as Turkey’s president following a run-off election which saw him take 52% of the votes, against Kemal Kilicdaroglu’s 48%

Find out more about our foreign exchange solutions
Contact us