UK Unemployment Drops to 3.8%
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Official data released on 13th February revealed that towards the end of last year, the UK's unemployment rate improved, while average earnings continued to increase. The most recent statistics from the Office for National Statistics indicate that in the three months leading up to December, the unemployment rate for individuals aged 16 and over stood at 3.8%. This marked a decrease from November's rate of 4.2%.
In November, the economic inactivity rate rose to 21.9% from 20.9%. The Office for National Statistics attributed this increase to a high number of individuals classified as long-term sick. The claimant count for January saw an increase of 14,100 from the previous month or 61,200 from the previous year, totaling 1.579 million. The employment rate stood at 75.0%. Meanwhile, vacancies decreased by 26,000 in the quarter, amounting to 932,000. This marks the nineteenth consecutive month of decline in vacancies, although they remain higher than pre-pandemic levels.
Wage growth surpassed expectations, with annual growth in employees' average regular earnings, excluding bonuses, reaching 6.2%, compared to the consensus forecast of 6.0%. Including bonuses, wages increased by 5.8%. However, both measures experienced a decline from November when total pay rose by 6.7% and regular pay by 6.6%. In real terms, adjusting for inflation, annual growth for total pay in December was 1.4%, while regular pay saw a growth of 1.8%.
The recent decline in the unemployment rate, from its peak of 4.3% in July following the Covid pandemic, appears dubious. Several surveys suggest an improvement in staff availability for vacancies.
Economics Analysts commented that, "Although wage growth decreased further in December, indications that the labor market may not be relaxing significantly imply that wage growth might not decline as rapidly as anticipated. In general, a slower-than-expected moderation in wage growth could, to some extent, alleviate the urgency for the Bank of England to cut interest rates. However, this outcome will heavily hinge on broader price pressures."
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