Haver Analytics
Haver Analytics
United Kingdom
| May 16 2023

UK Labor Market Cooling Off

The latest raft of UK labor market data offered some welcome news for the Bank of England. Most gauges of activity, for example, suggested that a lot of heat is now coming out of the labor market. And the same can be said of most of the gauges for wage pressures as well.

The key highlights from this month’s report included the following:

The unemployment rate rose to 3.9% in the three months to March from 3.8% in the previous three months. Unemployment has now risen steadily over the last few months from a low of 3.5% last August.

The number of payroll employees fell by 136k between March and April – the first monthly decline since the start of 2021. The consensus had expected a rise of 25k.

Average total pay (including bonuses) increased by 5.8% in the three months to March while regular pay grew by 6.7%. Both estimates were also lower than economists’ expectations. They suggest a slower pace of wage growth compared to last year. In the meantime and when adjusted for headline inflation, real wage growth continued to remain in deep negative territory (see chart above).

Inactivity – which had risen sharply over recent years – continues to show signs of recovery. Over the past quarter, the number of people saying they were inactive fell by 156k or 1.8%, with almost two-thirds of that improvement coming from students.

In conclusion, this is an inflation-friendly report, and will buttress expectations that the Bank of England is close to completing its tightening cycle.

  • Kritika joined Haver Analytics as a Junior Economist in August 2022. She writes commentary on UK macroeconomic trends and provides client support of Haver’s data content and proprietary software.

    From 2019 to 2022 Kritika worked in Financial Accounting and Capital Markets. Prior to working in financial services, she was a research assistant at Frontier Economics within the public policy practice and has also interned at HM Revenue and Customs.

    Kritika holds an MA in Economics from the University of Manchester and a BA in Economics from India.

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