United Kingdom: Labor market stays solid in November-January period

In the November-January period, the unemployment rate reached a fresh multi-decade low of 3.9%, while the employment rate rose to a record high. Employment rose by 222,000 compared to August-October, topping market expectations, due to more full-time and part-time positions.

The tight labor market continued to support wage pressures, with nominal earnings growth excluding bonuses remaining at a multi-year high of 3.4%, markedly outpacing the rate of inflation.

In Q1 it is uncertain whether the labor market will be able to maintain such strong momentum; the services and manufacturing PMIs for February showed employers cutting staff levels, while Brexit uncertainty has intensified. Assuming a hard Brexit is avoided however, the unemployment rate should remain low and wage growth robust going forward.

UK Unemployment Rate Forecast

Our panelists currently see the unemployment rate averaging 4.2% in 2019 and 4.3% in 2020, while real disposable income is seen increasing 1.4% in 2019 and 1.6% in 2020.