14 May 2024
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 unemployment level in the UK has risen once again, according to the Office for National Statistics, reaching 4.3% in the three months to March 2024 up from 4.2% in the three months to February. Wage growth, an indicator the Bank of England has been keeping a particularly watchful eye on, is reported to have increased slightly. Annual growth in total earnings including bonuses increased slightly to 5.7%, up from 5.6% previously, while annual growth in average regular earnings remained stagnant at 6%.
“Though small, this uptick in wages will be of concern to the Bank of England, particularly when coupled with new data from the Resolution Foundation released just yesterday which revealed that real wages - measured in terms of the goods workers can buy with regular wages - rose by 2% in the year to February 2024. Though this is good news for households as cost of living pressures should now be easing somewhat, the Bank will likely fear that it risks being inflationary if businesses attempt to restore profits by raising prices.
“Labour market inactivity, another area that has been watched keenly by the Bank of late, also climbed. In the three months to March 2024, the UK economic inactivity rate for those aged 16 to 64 years reached 22.1% - this is above estimates of a year ago, and an increase on the last quarter.
“Despite questions around the accuracy of the ONS data, which the Bank of England highlighted as a challenge for its decision-making, the labour market data remains a pivotal factor in monetary policy. As the Bank contemplates its first interest rate cut, the precision of these figures is crucial. Any data inaccuracies could significantly impact the economy, necessitating a cautious approach by the Bank. Though we have seen a slight uptick in wage growth, the possibility of rate cuts later in the summer still looms, adding to the Bank’s deliberations."
