United Kingdom: Labor market sends mixed signals in the October-December period
February 21, 2018
Jobless claims fell by 7,200 in January according to the Office for National Statistics (ONS) compared to a revised 6,200 uptick in December (previously reported: +8,600) and defying analysts’ expectations of a rise in the claimant count.
The unemployment rate—derived from a different survey—picked up to 4.4% in October-December, the first rise in well over a year and above market expectations of 4.3%. However, employment rose by 88,000 compared to July-September, thanks to more full-time jobs. The rise in the unemployment rate was driven by more people who had been economically inactive rejoining the labor market.
Although real wages declined for the tenth consecutive rolling quarter, nominal wage growth excluding bonuses picked up to 2.5% in October-December from 2.3% in September-November, showing particular strength in the month of December. Combined with a likely fall in inflation over the coming months, higher nominal pay should see consumers’ real earnings turn positive again, easing the squeeze on household budgets.
UK Unemployment Rate Forecast
Our panelists expect the unemployment rate to drift up slightly from its current level going forward, averaging 4.5% in 2018 and 4.6% in 2019. Real wages should recover gradually as inflation recedes, although only a mild improvement is forecast for this year.
Author: Oliver Reynolds, Economist