United Kingdom Unemployment April 2018

United Kingdom

United Kingdom: Employment growth remains solid but wage growth is weak

June 12, 2018

The unemployment rate remained at a multi-decade low of 4.2% in the February-April period, where it has been for three consecutive rolling quarters. This was underpinned by ongoing strong employment growth: 146,000 jobs were added compared to the November-January period, once more beating market expectations. However, the rise was mainly a result of greater part-time work, with the total hours worked in the economy declining slightly. Higher employment saw the inactivity rate remain at an all-time low of 21.0%.

Despite the tight labor market, the recent recovery in wages appeared to lose some impetus in February-April, with nominal earnings growth excluding bonuses dipping to 2.8% from 2.9% in the prior rolling quarter. Although real earnings continued to rise marginally, average total pay is still below the pre-crisis peak reached in 2008.

The Central Bank expects nominal regular pay growth to continue to hover slightly below 3.0% this year. However, as inflation gradually declines, this should see a gradual uptick in real wage growth, although it will likely remain sluggish. Public-sector pay—which has been constrained in recent years by austerity measures—is likely pick up as the government gradually lifts its spending straightjacket thanks to an improved fiscal situation.

Our panelists currently expect the unemployment rate to average 4.4% in 2018 and 4.5% in 2019.

Author:, Economist

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United Kingdom Unemployment Chart

UnitedKingdom Unemployment April 2018

Note: Three-month average of unemployment rate in %.
Source: Office for National Statistics (ONS).

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