UK unemployment rate ticks higher; wages fall

by | Jun 14, 2022

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The UK unemployment rate unexpectedly rose in the three months to April for the first time in a year, while vacancies remained at record levels and wages fell at the fastest rate in a decade.
According to data released on Tuesday by the Office for National Statistics, the unemployment rate ticked up to 3.8% from 3.7% in the three months to March and versus expectations for a decline to 3.6%. Still, it remained close to 50-year lows.

The number of people on payrolls rose by 90,000 in May to a fresh record high of 29.6m and the number of job vacancies in March to May hit a new record high of 1.3m.

The figures also showed that before inflation, total pay including bonuses grew 6.8% in the year to February-April and regular pay excluding bonuses was up 4.2%. However, real wages adjusted for inflation running at around 9% fell 2.2% on the year – the biggest decline since 2011.

 
 

Sam Beckett, ONS head of economic statistics, said: “Today’s figures continue to show a mixed picture for the labour market.

“While the number of people in employment is up again in the three months to April, the figure remains below pre-pandemic levels.

“Moreover, although the number of people neither in work nor looking for a job has fallen slightly in the latest period, that remains well up on where it was before Covid-19 struck.

 

“At the same time, unemployment is close to a 50-year low point and there was a record low number of redundancies.

“Job vacancies are still slowly rising, too. At a new record level of 1.3 million, this is over half a million more than before the onset of the pandemic.

“The high level of bonuses continues to cushion the effects of rising prices on total earnings for some workers, but if you exclude bonuses, pay in real terms is falling at its fastest rate in over a decade.”

 

Paul Dales, chief UK economist at Capital Economics, said: “Of course, the labour market is still very tight, with the unemployment rate still close to its recent 47-year low, the three-month average of vacancies still at a record high and nominal wage growth unusually strong (although it is still falling in real terms). And we shouldn’t read too much into one month’s release. But it is possible that this is the very first signs that the weakening in economic activity since the start of the year is filtering through into a less tight labour market.

“That won’t be anywhere near enough to prevent the Bank from raising interest rates on Thursday. But together with the fall in GDP in April revealed yesterday, it may tilt the decision towards a 25bps rather than 50bps hike. That said, the possibility of a 75bps hike from the Fed tonight and the latest weakening in the pound to $1.22 is pushing in the other direction. We’re sticking with our 50bps forecast and still think that rates will need to rise from 1.00% now to 3.00% next year.”

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