- Employment climbs 20,000, weakest reading since June 2015
- Total wage growth slows as bonuses in financial sector decline
U.K. unemployment rose for the first time in seven months and employers added far fewer jobs than forecast, suggesting the labor market is cooling.
The number of people looking for work climbed by 21,000 to 1.7 million in the three months through February, the Office for National Statistics in London said on Wednesday. That left the jobless rate unchanged at a decade-low of 5.1 percent, as forecast by economists. Employment rose by 20,000, the weakest reading since June last year.
The figures also showed few signs of wage pressure. Pay growth excluding bonuses was unchanged at 2.2 percent in the latest three months. Total pay inflation moderated to 1.8 percent from 2.1 percent, reflecting a sharp drop in financial-sector bonuses.
The report comes as the referendum on whether Britain should remain in the European Union looms. The Bank of England has suggested it’s no hurry to raise interest rates from a record low and some surveys indicate the June 23 EU vote is starting to weigh on investment and hiring plans.
“It’s too soon to be certain, but with unemployment up for the first time since mid-2015 -- and employment seeing its slowest rise since that period -- it’s possible that recent improvements in the labor market may be easing off,” said ONS statistician Nick Palmer.
The pound recovered initial losses following the data and was trading at $1.4402 a.m. as of 11:-3 a.m. London time, unchanged on the day.
The “double whammy” of rising unemployment and a marked fall in headline earnings growth may “fuel the belief that the Bank of England’s eventual next move could well be to cut interest rates,” said Howard Archer, chief economist at IHS in London. “At the very least, the data will reinforce belief that any interest rate hike is completely off the table for the time being.”
The economy added only a third of the 60,000 jobs forecast in a Bloomberg survey. That was insufficient to absorb an extra 41,000 economically active people and unemployment rose as a result. As recently as the fourth quarter of 2015, employment grew by more than 200,000.
Weak Cost Pressure
Jobless benefits, a narrower measure of unemployment, climbed 6,700 in March. Economists had forecast a drop of 10,000. The jobless-claims rate stayed at 2.1 percent.
ONS statisticians said there was no evidence in official figures to show that the labor-market weakness was due to the referendum. In a separate monthly report on the economy published Wednesday, the BOE said staffing intentions in April were “little changed and consistent with muted employment growth.”
“Labor-cost growth had remained moderate overall and had eased a little in manufacturing reflecting the recent weakness in demand growth,” the central bank said in its agents’ summary of business conditions.
Work and Pensions Secretary Stephen Crabb said the figures reflected a difficult four months for global markets and warned that the referendum had raised “big question marks” over the British economy.
“There will be companies right now today who’ve been looking at major investments into the U.K. who are hanging back and considering whether that’s the right thing to do,” he told BBC Television. Brexit campaigners “need to explain why their position of coming out of the single market actually makes the picture better and enhances job opportunities for British workers.”
The Institute of Directors, which has a neutral stance on the referendum, said how employment would fare if Britain quits the EU is an open question. “What is clear, however, is that it would be extremely good if other EU economies were able to generate jobs at the rate the U.K. achieves.”
In February alone, total pay rose just 1.1 percent from a year earlier, the smallest increase since August 2014, the ONS figures show. Wage growth in the private sector also slowed to the weakest since 2014.