UK reaction: Unemployment rises but the focus remains firmly on pay growth
- 16 April 2024 (3 min read)
The UK’s jobs market appears to be cooling with the Pay As You Earn (PAYE) measure of employee numbers falling by 67K in March. This puts three-month-on-three-month growth at just 0.1%, the slowest pace since February 2021 when the UK was still in lockdown. Meanwhile, Labour Force Survey data showed that employment fell by 156K in the three months to February, compared to the previous three months, pushing up the unemployment rate to 4.2%, from 3.9% in January. That is still below the Bank of England Monetary Policy Committee’s (MPC) expectations for the first quarter (Q1), at 4.4%, but today’s data is a step in the right direction for the MPC, particularly as other employment measures are also increasing gradually. Vacancies, for instance, fell for the 21st consecutive period in the three months to January, and are now 383K below their peak in the three months to June 2022. Survey measures are also consistent with a further small rise in the unemployment rate in the months ahead.
The focus, however, was on wage growth which came in above expectations, despite edging back. Indeed, the headline rate of average weekly earnings excluding bonuses dropped to 6.0%, from 6.1%, but had been expected to slow to 5.8%. And the three-month-on-three-month annualised growth rate picked up to 4.8%, from 3.5% in January.
Changes in pay growth will be key for the MPC over the next couple of months, as it monitors the impact of the near 10% National Living Wage hike this spring. We doubt the upward pressure from this will be enough to stop the headline growth rate from ticking down over the coming months, since it affects just 5% of the labour force. The MPC will have this information by its June meeting, so a cut then still looks most likely to us. The slowdown in pay growth should then gather momentum in the second half of the year as unemployment continues to rise. Indeed, a gradual pick-up in the workforce, due to strong immigration, should mean the unemployment rate continues to rise, reaching around 4.4% by year end. The market reaction was fairly muted. Sterling is up 0.05% against the dollar at $1.2436.
Disclaimer
The information on this website is intended for investors domiciled in Switzerland.
AXA Investment Managers Switzerland Ltd (AXA IM) is not liable for unauthorised use of the website.
This website is for advertising and informational purpose only. The published information and expression of opinions are provided for personal use only. The information, data, figures, opinions, statements, analyses, forecasts, simulations, concepts and other data provided by AXA IM in this document are based on our knowledge and experience at the time of preparation and are subject to change without notice.
AXA IM excludes any warranty (explicit or implicit) for the accuracy, completeness and up-to-dateness of the published information and expressions of opinion. In particular, AXA IM is not obliged to remove information that is no longer up to date or to expressly mark it a such. To the extent that the data contained in this document originates from third parties, AXA IM is not responsible for the accuracy, completeness, up-to-dateness and appropriateness of such data, even if only such data is used that is deemed to be reliable.
The information on the website of AXA IM does not constitute a decision aid for economic, legal, tax or other advisory questions, nor may investment or other decisions be made solely on the basis of this information. Before any investment decision is made, detailed advice should be obtained that is geared to the client's situation.
Past performance or returns are neither a guarantee nor an indicator of the future performance or investment returns. The value and return on an investment is not guaranteed. It can rise and fall and investors may even incur a total loss.
AXA Investment Managers Switzerland Ltd.