The Office for National Statistics reported a decline in the UK unemployment rate to 4.9% for the three months ending in February, down from 5.2% in the previous quarter. During the same period, average wage growth was recorded at 3.6%, slightly lower than the 3.8% in January, with bonuses included showing a growth of 3.8%. These figures surpassed expectations.
This data reflects a period predating the full impact of the Middle East conflict, which experts believe could lead to increased inflation and potentially higher unemployment rates as businesses, faced with rising costs, may reduce hiring. Wage growth in the public sector stood at 5.2%, while the private sector saw a growth of 3.2%.
Job vacancies decreased in the latest quarter, with estimates dropping by 29,000 to 711,000 compared to the previous quarter, marking the lowest level since early 2021. ONS Director of Economic Statistics Liz McKeown noted that while unemployment decreased to 4.9%, the number of workers on payroll remained stable, indicating subdued hiring trends.
Yael Selfin, chief economist at KPMG UK, highlighted that wage growth was slowing down before the Middle East conflict, reducing the risk of surging pay pressures due to higher energy costs. The labor market’s weakened state may limit workers’ bargaining power, potentially averting a wage-price spiral. However, this poses a challenge for the Bank of England, which is expected to maintain interest rates in light of these developments.
Luke Bartholomew, deputy chief economist at Aberdeen, cautioned that while the drop in unemployment is notable, it may not hold significant market impact as it precedes the conflict’s effects. He emphasized the importance of upcoming payrolls data for a clearer picture of the labor market’s current state.
These updates precede the forthcoming inflation data release by the ONS, expected to shed light on the early repercussions of the Middle East conflict in March.
