The UK's unemployment rate fell to its lowest level since mid-2021, while wage growth remained robust over the three months leading to April, bolstering the view that the Bank of England might cut interest rates in August.
The Office for National Statistics (ONS) reported that the unemployment rate climbed to 4.4 percent in the three months to April, up from 4.3 percent in the preceding period. This rise was unexpected as forecasts had predicted the rate would hold steady at 4.3 percent, marking the highest unemployment rate since mid-2021.
During the February to April period, the employment rate was estimated at 74.3 percent.
In terms of earnings, average wages excluding bonuses grew at a consistent rate of 6.0 percent year-on-year, meeting expectations. Including bonuses, average earnings saw a stable growth of 5.9 percent, surpassing economists' forecast of a 5.7 percent increase.
Despite the solid wage growth, the unforeseen rise in unemployment could temper future pay raises.
Furthermore, May data indicated that payroll employment fell by 3,000 from the prior month, reaching 30.3 million. Vacancies also declined for the 23rd consecutive quarter, falling by 12,000 to 904,000.
In April, labor disputes resulted in the loss of 17,000 working days.
May also saw the claimant count rise to 4.3 percent, up from 4.1 percent the previous month, with an additional 50,400 people claiming benefits compared to April.
The ONS noted, "This month's figures continue to show signs that the labor market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong."
Ruth Gregory, an economist from Capital Economics, suggested that the persistent wage growth might not prevent the Bank of England from cutting interest rates in August, provided other indicators such as pay settlements data and next week's CPI inflation release show favorable progress.
James Smith, an economist from ING, concurred, stating that the BoE remains on course for a rate cut in August, assuming that inflation in the services sector proves less surprising next week.
The Bank of England's next monetary policy announcement is scheduled for June 20. The bank left its key policy rate unchanged for the sixth consecutive meeting in May, maintaining it at 5.25 percent, the highest level since early 2008.
The latest KPMG/REC Report on Jobs, released on Monday, indicated that starting pay for candidates increased in May due to a competitive market landscape. This was accompanied by a ripple effect on base pay rates following rises in national minimum and living wages. However, growth in pay rates for both permanent and temporary staff was slightly slower compared to April.
