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United Kingdom Unemployment December 2023

United Kingdom: Labor market momentum ebbs at end of Q4

According to the statistical office, vacancy numbers declined in the three months to December for the 18th consecutive period, while employment decreased by 24,000 month on month in December. Moreover, wage growth dipped to 5.0% in November from 5.9% in the month prior. As has been the case since last July, official unemployment figures were not published together with the aforementioned labor market data due to quality concerns. However, experimental data released by the statistics office suggested the unemployment rate remained at 4.2% in the three months to November, up from the low-point of 3.5% reached in mid-2022 but still low by historical standards.

Our Consensus is for the unemployment rate to rise slightly in the coming quarters as the effect of past rate hikes is increasingly felt. Meanwhile, declining wage growth should underpin rate cuts this year.

On the implications for the Bank of England’s monetary stance, ING’s James Smith said:

“Pay growth is tracking a fair bit below where policymakers had forecast it to be at this point. […] But we’d caution that the Bank will want to see more progress on both the official pay numbers as well as those survey expectations of wages before kick-starting an easing cycle. We also think the budget on 6 March will have a strong influence on the timing of the first cut. A sizeable package of tax cuts would probably help convince the committee to keep rates higher for a little longer.”

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