The UK unemployment rate dropped to 4.9% in the three months ending in February, down from 5.2% in the previous three months, reported the Office for National Statistics. During the same period, average wages increased by 3.6%, slightly lower than January’s 3.8%, marking the slowest growth since November 2020. Pay, including bonuses, rose by 3.8%, surpassing expectations.
These statistics capture a period predating the full impact of the recent Middle East conflict, which experts fear may lead to heightened inflation and potential job losses as businesses, facing increased expenses, may reduce hiring. Wage growth in the public sector averaged 5.2%, compared to 3.2% in the private sector.
Job vacancies decreased in the latest quarter, with an estimated 29,000 fewer vacancies (3.9%) compared to the previous quarter, totaling 711,000 vacancies – the lowest level since early 2021.
Liz McKeown, the ONS Director of Economic Statistics, highlighted that while unemployment decreased and the number of job seekers not actively looking for work increased, indicating fewer students seeking employment alongside studies, wage growth has slowed significantly.
Yael Selfin, chief economist at KPMG UK, noted that wage growth was decelerating prior to the Middle East conflict, reducing the risk of increased pay pressures due to energy costs. However, the labor market’s weakened state may limit workers’ bargaining power, potentially affecting wage dynamics and prompting the Bank of England to maintain interest rates steady this year.
Luke Bartholomew, deputy chief economist at Aberdeen, commented that despite the notable decline in unemployment figures, it is likely to be overshadowed by rising inactivity rather than robust hiring trends. He also pointed out that real wage growth could turn negative in the face of escalating inflation and moderating cash wages.
The released data precedes the upcoming inflation report by the ONS, expected to shed light on the early effects of the Middle East conflict in March.