United Kingdom: Unemployment rate falls and pay squeeze eases in December-February
April 17, 2018
The unemployment rate dipped to a fresh multi-decade low of 4.2% in the December-February period from 4.3% in the November-January period, beating market expectations of a 4.3% reading. On a quarter-on-quarter basis, employment surged by 55,000—once more significantly outpacing the figure analysts were expecting—on higher full-time and part-time employment, while the economic inactivity rate remained at a multi-decade low.
Real wages increased in December-February for the first time since early 2017, driven by higher nominal wage growth and a merciful decline in inflation in February. This positive development for consumers is likely to continue, as the impact of weaker sterling on inflation winds down and a tight labor market generates greater wage pressures. In addition, the government appears to be slowly lifting the public-sector spending straightjacket—as evidenced by a recent pay settlement for healthcare workers which should see above-inflation pay rises over the next few years.
UK Unemployment Rate Forecast
Last month, our panelists expected the unemployment rate to average 4.4% in 2018 and 4.6% in 2019. Our panelists are currently assessing the latest developments, with a new Consensus Forecast to be published on 30 April.
Author: Oliver Reynolds, Economist