UK jobless rate rises unexpectedly, wage growth steady

22/02/2018 05:42 AST

Britain’s jobless rate unexpectedly rose for the first time in almost two years and pay growth remained modest, leaving the Bank of England waiting for the stronger labour market that would justify a new interest rate hike.

British government bond prices rose and sterling briefly fell against the US dollar after Wednesday’s official figures, which showed the sharpest increase in the number of people out of work in almost five years.

Separate data showed finance minister Philip Hammond was on track to meet his targets for further cutting Britain’ budget deficit this financial year. British households lost spending power last year due a jump in inflation, caused by the post-Brexit vote fall in the pound.

But the BoE expects pay to pick up soon, a big reason why it says interest rates are likely to rise faster and to a greater extent than it thought until recently.

“With wage growth stuck in neutral, policymakers will need to think very carefully about a rate hike in May,” Maike Currie, an investment director at Fidelity International, said.

The Office for National Statistics said the unemployment rate rose to 4.4 per cent from 4.3 per cent in the three months to December, the first increase since the three months to February 2016, as the number of jobless rose for a third monthly report in a row.

The number of people in work grew less than expected, rising by 88,000, about half the consensus forecast in a Reuters poll of economists. The ONS attributed the rise in unemployment to fewer economically inactive people — those neither working nor looking for a job — entering unemployment, rather than people in work losing their jobs.

Workers’ total earnings, including bonuses, rose by an annual 2.5 per cent in the three months to December, as expected and unchanged from the three months to November.

BoE officials may take encouragement from pay jumping 2.8 per cent on the year in December alone. But that was still weaker than the 3.0 per cent reading of British consumer price inflation for December.

Gulf News