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| UK unemployment rises and wage growth slows as jobs market ‘weakens’ | |
| (about 1 hour later) | |
| ONS data shows jobless rate climbing to highest rate since June 2021 with growth in average earnings slowing to 5%. | ONS data shows jobless rate climbing to highest rate since June 2021 with growth in average earnings slowing to 5%. |
| Business live – updates | Business live – updates |
| Unemployment climbed and wage growth slowed in the three months to May, according to official figures that will pressure the Bank of England to cut interest rates next month. | |
| Data from the Office for National Statistics, released on Thursday, showed that Britain’s official unemployment rate rose to 4.7% in the three months to May, up 0.1% from April to reach the highest level since June 2021. | |
| Pay growth slipped from 5.3% to 5%, as forecast by City analysts. Unemployment had been expected to remain at 4.6%. | |
| The ONS director of economic statistics, Liz McKeown, said the labour market “continues to weaken”. | |
| Against a backdrop of negative economic growth coupled with rising inflation, the figures are expected to give the Bank of England a headache before its next decision on interest rates on 7 August. | Against a backdrop of negative economic growth coupled with rising inflation, the figures are expected to give the Bank of England a headache before its next decision on interest rates on 7 August. |
| While inflation rose last month to 3.6%, above the central bank’s 2% target, Threadneedle Street officials are expected to be more concerned about figures showing that the economy contracted by 0.1% in May, adding to a 0.3% decline in April. | While inflation rose last month to 3.6%, above the central bank’s 2% target, Threadneedle Street officials are expected to be more concerned about figures showing that the economy contracted by 0.1% in May, adding to a 0.3% decline in April. |
| Analysts are predicting two interest rate cuts this year with the first to take place at the Bank’s August meeting. | Analysts are predicting two interest rate cuts this year with the first to take place at the Bank’s August meeting. |
| The figures also present a problem for the chancellor, Rachel Reeves, who is under pressure over Labour’s economic management and added labour costs for businesses. | |
| Reeves is widely expected to raise taxes in her autumn budget but the weaker outlook for the UK economy and rising joblessness will make it more difficult to raise taxes without further harming growth. | |
| Vacancies in the UK fell in June to 727,000, marking the 36th consecutive month of decline in the number of jobs advertised by employers, or three whole years. | |
| Suren Thiru, head of economics at the accountancy body, the ICAEW, said: “The UK’s jobs market has hit a rough patch with spiralling business costs and a wilting economy. | |
| “These dispiriting figures probably seal the deal on an August interest rate cut.” | |
| Paul Dales, chief UK economist at Capital Economics, said the latest inflation figures showed that businesses were responding to higher national insurance contributions and an inflation-busting rise in the minimum wage by increasing their selling prices. | |
| He said: “But the bigger response appears to be the reduction in headcounts, which should eventually weigh on inflation. That’s why we think the Bank will continue to cut interest rates gradually from 4.25% now to 3%.” | |
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| The National Institute of Economic and Social Research (NIESR) was more sceptical that the Bank would ignore the rise in inflation. | |
| Monica George Michail, an economist at NIESR, said: “Strong wage growth has been a source of inflationary pressure, causing a headache for the Bank of England’s interest rate cut decisions.” | |
| She said wage growth was likely to fall slowly, limiting interest rate cuts to just one this year. | |
| Charlie McCurdy, an economist at the Resolution Foundation, said there were signs that pay rises were on a steady decline. | |
| In the private sector, pay rises were 3.7% on average in May, a sharp fall from 4.3% in the three months to April. | |
| “However, annual pay growth still exceeds any period prior to the pandemic, and crucially pay packets still grew faster than prices over the past year. Inflation-adjusted average regular weekly earnings grew by 1.1% in the three months to May,” he said. | |
| A snapshot of the jobs market in June by the Recruitment and Employment Confederation and the accountancy firm KPMG showed the number of new candidates looking for work rose at the sharpest rate since November 2020, when the UK entered the second nationwide lockdown during the Covid pandemic. | A snapshot of the jobs market in June by the Recruitment and Employment Confederation and the accountancy firm KPMG showed the number of new candidates looking for work rose at the sharpest rate since November 2020, when the UK entered the second nationwide lockdown during the Covid pandemic. |
| The report also found that, amid a wave of redundancies, permanent placements had dropped at the fastest pace in 22 months. | The report also found that, amid a wave of redundancies, permanent placements had dropped at the fastest pace in 22 months. |