U.K. Wage Growth Accelerates as Unemployment Rate IncreasesJillian Ward
U.K. wage growth accelerated to the fastest pace in more than five years while the jobless rate rose, creating a mixed picture for policy makers assessing the timing for the first interest-rate increase.
Total pay increased an annual 3.2 percent in the three months through May, the fastest since early 2010, the Office for National Statistics said Wednesday in London. It’s still less than the 3.3 percent pace forecast by economists; in addition, the ONS said the unemployment rate rose to 5.6 percent, the first increase since the fourth quarter of 2013.
The Monetary Policy Committee is closely monitoring the labor market for signs of price pressures though the inflation rate dropped to zero last month. Governor Mark Carney said Tuesday the time to raise interest rates from a record low is drawing closer, a view echoed by policy maker David Miles hours later.
“The soft tone of the latest U.K. labor-market figures will temper expectations of a near-term rate rise following yesterday’s relatively hawkish comments by some MPC members,” said Vicky Redwood, an economist at Capital Economics in London. Although some “are clearly ready to start voting for a rate rise soon, we don’t think that the economic data are strong enough to push a majority toward one yet.”
The pound was little changed after the data were published and was trading at $1.5629 as of 11:34 a.m. London time. It had risen as much as 0.2 percent to $1.5676 before the data.
The ONS report also showed that employment fell by 67,000 in the March-May period, the first decline since early 2013. There was a drop of 97,000 in part-time workers, while full-time employment increased 30,000.
Economists had forecast the ILO unemployment rate would stay at 5.5 percent, based on the median of estimates in a Bloomberg News survey. That level, reached in the three months through April, was the lowest since 2008.
The data are “extremely concerning,” said Stephen Timms, who speaks for the opposition Labour Party on work and pensions.
Total pay in the private sector increased an annual 3.8 percent in the quarter through May, according to the ONS. That’s the biggest increase since April 2010. Regular pay across the economy rose 2.8 percent, up from 2.7 percent.
A narrower measure of unemployment showed claims for jobless benefits rose 7,000 in June from May. That’s the first increase since October 2012. The rate on that measure stayed at 2.3 percent.
“It’s possible that the rate of improvement in the labor market that we have seen over the last three years may have eased off, though it’s much too early to be certain,” ONS statistician Nick Palmer said.
(An earlier version of this story corrected historical background on jobless rate.)