The unemployment rate in Britain has risen by more than expected and wage growth has eased back once again in the latest sign that economic uncertainty is affecting the U.K. jobs market, although leaving the door open for an interest rate cut according to analysts.
The Office for National Statistics (ONS) said the jobless rate jumped to 4.2% in the three months to February – the highest level for nearly six months and up from 3.9% in the three months to January.
Most economists had been expecting the rate only to edge up slightly to 4% in the quarter.
The official figures also showed regular wage growth, excluding bonuses falling back once again to 6% in the three months to February.
But, thanks to falling inflation, when taking the Consumer Prices Index (CPI) into account, real regular wages rose by 2.1%, which is the highest for almost 2.5 years.
Liz McKeown, ONS director of economic statistics, said: “Recent trends of falling vacancy numbers and slowing earnings growth have continued this month, albeit at a reduced pace.”
“At the same time, we are now seeing tentative signs that the jobs market is beginning to cool, with both a fall in the headline employment rate from our survey and a drop in the total number of people on payrolls from HMRC data.”
“Easing pressure in the labor market keeps the Bank of England (BoE) on track for a summer rate cut,” commented Yael Selfin, chief economist at KPMG UK.
“The slight easing in regular pay growth will bring some comfort for the BoE which has relied on the pay data as a key gauge of domestic inflationary pressure.
“Moreover, the rise in unemployment rate paints a picture of a less tight labor market.”
The Bank of England in March held its key interest rate at a 16-year high of 5.25%, as overall U.K. inflation remains stubbornly above its 2.0% target.
Inflation, however, fell to a near two-and-a-half-year low of 3.4% in February, easing the nation’s cost-of-living crisis.