The unemployment rate increased in the three months to February 2024, while growth in regular earnings slowed for the sixth time in a row, official statistics reveal.
Unemployment has jumped to an estimated 4.2% in the three months to February 2024, up from 3.9% in the previous quarter.
This means an estimated 1.44 million people aged 16+ are unemployed, according to the latest figures from the Office for National Statistics (ONS).
Turning to average weekly earnings, growth in regular earnings (excluding bonuses) came in at 6%, down from 6.1% in the previous quarter. This growth has slowed for the sixth time in a row, while a ‘stubborn’ 5.6% was recorded once bonuses were included.
However, annual growth in real terms – once inflation has been factored in – shows regular pay jumped 1.9%, while total pay stood at 1.6% during the three-month period.
This is the highest rate in almost two-and-a-half years, when it was last higher (3.1%), from July to September 2021.
Meanwhile, the ONS revealed that the UK employment rate (74.5%) for December 2023 to February 2024 remains below estimates a year ago, and decreased from 75% in the latest quarter. This represents 156,000 fewer people in employment, to stand at 32.9 million.
Vacancy numbers fell on the quarter for the 21st consecutive period, and were estimated at 916,000 in the three months to March. This is a fall of 13,000 or 1.4% from October to December 2023. According to the ONS, the number of unemployed people per vacancy was 1.6 in the quarter to February, up from 1.4 in the previous quarter because of declining vacancy numbers alongside rising unemployment.
Elsewhere, the UK economic activity rate for those aged 16-64 years was 22.2%, up from 21.8% recorded previously. In total, an estimated 9.4 million are economically inactive.
Rate cut set for summer?
According to Susannah Streeter, head of money and markets at Hargreaves Lansdown, average wage growth is still “obstinately high”, with growth slowing more gradually than expected.
“It’s likely to make the Bank of England that bit more reticent about cutting interest rates”, she said.
Streeter added: “Even though headline inflation is on track to hit its target in the next few months, policymakers are concerned that persistently high pay might cause it to pop back up, and this snapshot does very little to alleviate those fears.”
“This means there is a greater chance interest rate cuts may come a bit later in the summer, with August now looking increasingly likely. However, a lot can happen in the next few months and June still can’t be ruled out.”
However, Paul Dales, chief UK economist at Capital Economics, pens a possible rate cut in June.
Dales said: “The more marked weakening in the labour market in February than expected suggests that wage growth will continue to slow over the next six months, even though the pace of decline appears to have eased.
“Overall, if it wasn’t for the clear weakening in activity in the labour market, we’d be a bit worried that the UK’s disinflation process is grinding to a halt like in the US. But with employment falling sharply and the unemployment rate climbing, we suspect wage growth will continue to ease in the coming months. That may allow the bank to cut interest rates in June, even if the Fed doesn’t move until September.”
