16 May 2023
If you are covering the latest UK labour market statistics, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“The UK labour market remains very tight, and this morning’s ONS jobs data shows unemployment saw an unexpected uptick of 0.1 percentage points on the quarter to 3.9% while the number of job vacancies continued to fall, dropping by 55,000 on the quarter to 1,083,000 in February to April 2023.
“Last week the Bank of England continued its battle with inflation with a 25bps interest rate hike, taking its base rate to 4.5%. Wage growth is one area that has gained a lot of headlines as leading figures have asked for pay restraint, and the Bank will continue to watch it with a keen eye. While wage growth is a lagging indicator, today’s data show wages have continued to climb, but the pace at which they are growing has slowed. The ONS reports growth in regular pay (excluding bonuses) up 6.7% in January to March 2023, just a 0.1% increase compared to 6.6% reported in December to February 2023. The Bank is left facing a tricky task of knowing when enough is enough on interest rates, and this morning’s data may mean we are not quite at the end of the hiking cycle yet. It will be hoping wage growth continues to moderate and doesn’t threaten to rip up the inflation forecasts it is relying on when it comes to interest rate setting.
“Following the Chancellor’s ‘back to work’ budget in March, he will be relieved to see the rate of economic inactivity decreased by a further 0.4 percentage points on the quarter to 21.0% in January to March 2023. The Chancellor had aimed to boost the UK’s productivity largely by tempting older workers back into employment with major changes to pensions allowances, though this change in inactivity was still largely driven by those aged 16-24. This suggests the post-pandemic trend of economic inactivity in older workers continues and only time will tell whether the Chancellor’s incentives can provide the boost he was hoping for.”
