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United Kingdom Unemployment March 2018

United Kingdom: Employment surges and real wage growth returns in first quarter

The unemployment rate remained at a multi-decade low of 4.2% in the January-March period, supported by a 197,000 surge in employment over the prior quarter—a figure far higher than analysts were expecting. The number of both full- and part-time jobs rose sharply. Higher employment also caused the inactivity rate to fall to an all-time low of 21.0%.

On the back of gradually declining inflation and higher nominal wage pressures, real wages rose in annual terms in January-March following four consecutive quarters of negative readings. This positive development for consumers is likely to continue, as the impact of weaker sterling on inflation winds down and greater capacity constraints generate wage pressures. In addition, the government is slowly lifting the public-sector spending straightjacket—as evidenced by a pay rise agreed for healthcare workers in March—and a better-than-expected fiscal situation in recent months could provide more room for further government expenditure increases going forward.

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