Small rise in unemployment sees rate rise becoming even less likely

20th April 2016


UK unemployment rose slightly by 21,000 to 1.7 million between December and February, according to the Office for National Statistics.

The unemployment rate remained at 5.1% lower than last year when it was 5.6%.

Earnings, including bonuses rose by 1.8% in the three months to February, which is a slowdown from the 2.1% rate for the previous three-month period.

“It’s too soon to be certain, but with unemployment up for the first time since mid-2015 – and employment seeing its slowest rise since that period – it’s possible that recent improvements in the labour market may be easing off,” ONS statistician Nick Palmer said.

However in better news, there were 31.41 million people in work in the three months, a rise of 20,000 on the September to November period.

Ben Brettell, Senior Economist, Hargreaves Lansdown says: “Last week the Bank of England said that concerns about the EU referendum had begun to affect the real economy, and the increase in unemployment announced today adds some weight to that hypothesis. It’s possible businesses are delaying decisions about hiring and investment until after June’s vote, which could lead to a slowdown in the first two quarters of this year.

“Nevertheless, the bigger picture is that the UK labour market remains in reasonable health. The increase in unemployment wasn’t even enough to change the rate when expressed to one decimal place, which stayed at a decade low of 5.1% (compared with 5.6% for a year ago). Employment of 74.1% is the joint-highest since records began.

“However, the wage growth numbers emphasise that there is very little inflationary pressure coming from the labour market. Indeed continued low price inflation could be depressing wage inflation as it leads workers to accept lower pay settlements – leading to a vicious cycle where both price and wage increases remain depressed.

“The Bank of England continues to view robust wage growth as a prerequisite for judging that higher interest rates are appropriate. Continued weakness places no upward pressure on rate expectations, though global concerns and uncertainty over the EU referendum have already made a rate rise extremely unlikely in the short-to-medium term.”


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