UK jobless rate falls unexpectedly to 5 pct in three months to April

The UK labor market data moved away from the latest trend as jobless rate declined unexpectedly in the three months to April. According to the Office for National Statistics, UK’s unemployment rate dropped to five percent, the lowest level since 2005. This is the level where capacity constraints are likely to exert upward pressure on wages. Number of unemployed people declined 20,000, whereas the number of employed people rose by 55,000.

“News of better than expected health of the labour market in April suggest that employment is holding up despite signs that the economy is in the midst of a soft patch,” stated Chris Williamson, chief economist at Markit.

Meanwhile, average wages grew 2.5 percent y/y in April; however, the rise seems to have been driven by the set up of the national Living Wage in April. In the April quarter, average weekly pay growth remained at 2 percent. Pay, excluding bonuses, rose modestly by 2.3 percent, as compared with the rise of 2.2 percent in the three months to March.

The rebound in labor market is aiding underpin the UK economy through increased consumer spending. According to a different survey data, consumers enjoyed rises in both workplace activity and income from employment in June, which along with low inflation aided in raising the consumers’ views on finances, according to Chris Williamson.

Recruitment firms have stated that even if the introduction of National Living Wage has accelerated the average wage rates, the rise in staff costs has also resulted in reducing hiring at certain companies. Growing uncertainty and sluggish economic growth might have also impacted hiring in recent months. This implies that the labor market data might disappoint in May and June, added Williamson.