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U.K. jobless rate rises slightly in three months to December

The U.K. Labor Force Survey estimates showed today that between July to September 2017 and October to December 2017, the number of people in work and the number of unemployed people both increased; however, the number of people aged 16 to 64 not working and not seeking or available to work decreased.

The latest labor market snapshot shows mixed messages for policymakers. While an upturn in pay growth opens the door further for interest rates to rise again, possibly as soon as May, signs of the labor market losing steam add to concerns that the economy is struggling under increased uncertainty, noted Chris Williamson at IHS Markit.

The ONS data showed that underlying pay growth rose at an annual pace of 2.5 percent in the three months to December. Private sector pay growth rose to 2.6 percent. Total pay growth was as 2.5 percent, unchanged on the three months to November, though jumped by 2.8 percent year-on-year in December alone.

Survey data imply that U.K. labor market continued to tighten at the beginning of 2018, with broad based shortages of staff again reported to have led to higher pay rates. Starting salaries grew at the most rapid pace for more than two-and-a-half years in January, which should feed through to higher pay growth throughout the economy.

But, while pay growth seems to be perking up, there are other signs that the labor market is beginning to cool. The jobless rate rose in the three months to December for the first time in almost two years, from 4.3 percent to 4.4 percent, as the number of unemployed rose for a third straight month. But, this was attributed to fewer people seeking employment, rather than redundancies.

Furthermore, employment rose less than projected, up 88,000 in the three months to December, which mirrors a trend of slower growth of hiring suggested by the surveys. Recruitment agencies reported that demand for staff from employers eased for a fourth straight month, rising at the slowest rate for 13 months in January.

“For a May rate hike to happen, policymakers will want to see not only persistent price pressures, but also signs that the economy has sufficient growth momentum to cope with a tighter monetary policy stance”, stated Chris Williamson.

At 16:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -41.3362, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 83.2126. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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