The UK unemployment rate remained unchanged in the three months to May and employment increased, signaling that the labor market continues to remain tight, official data revealed Tuesday.
The ILO unemployment rate came in at 3.8 percent in three months to May, unchanged from three months to April but down by 0.1 percentage points on the quarter, the Office for National Statistics said. The rate was forecast to rise to 3.9 percent.
The employment rate was 75.9 percent in three months to May, which was still below pre- coronavirus pandemic levels. The number of full-time employees increased during the latest three-month period to a record high.
Payrolled employees increased 31,000 on the revised May figures, to a record 29.6 million in June.
Data showed that the economic inactivity rate decreased by 0.4 percentage points to 21.1 percent in March to May period.
In the second quarter, the number of job vacancies rose to 1,294,000. However, the rate of growth in vacancies continued to slow down.
In the three months ended May, the average total pay including bonuses grew 6.2 percent from the last year but slower than the expected 6.7 percent increase.
At the same time, growth in regular pay excluding bonuses increased 4.3 percent, in line with expectations.
In June, claimant count decreased 20,000 from the previous month versus the expected fall of 41,200.
The labour market remains incredibly tight, in many cases affecting firms’ ability to maintain profitable operations, BCC Head of People Policy, Jane Gratton said. Although these figures show the employment rate has risen it is having no noticeable impact on the overall number of job vacancies.
The sharp increase in employment and pick-up in wage growth supports the assessment that the Bank of England will have to raise interest rates to a peak of 3.00 percent, instead of the analyst consensus of 2.00 percent, Capital Economics economist Ruth Gregory said.
August’s meeting remains a tough call, but the fact that markets are fully pricing a 50 basis point hike, against a backdrop of sterling pressure and the prospect of another 75 basis point hike from the Fed next week, suggests that the committee is likely to follow through with a more aggressive rate increase, James Smith, an ING economist said.